As big-name office tenants including KPMG and Franklin Templeton sign major leases to relocate to Manhattan’s Midtown South, a redeveloped century-old building spanning a full block has reached a milestone in a bid to be among the few properties with features such as large floor plates that corporate giants covet.

A two-story, 34,000-square-foot glass penthouse designed by Studios Architecture has been completed at what’s known as the Textile Building at 295 Fifth Ave. between east 30th and 31st streets. That's according to Tribeca Investment Group and its partners PGIM Real Estate, the global investment management business of Prudential Financial, and Meadow Partners.

The two-story addition is part of the more-than-$400 million redevelopment of a 700,000-square-foot building that had been used mainly as showroom space for the textiles industry before the project began. More than 2 1/2 years into the pandemic, the new owners are counting on the big floor plates, rustic steel, pinewood floor and other historic details of the updated building to make the property highly competitive.

Overhauled or new properties with larger floor plates and big blocks of space appeal to larger companies seeking to house their employees in one area as they try to attract talent and entice staff back in a challenging time for the U.S. office market.

The redevelopment comes as remote work and the uncertain future of office real estate are just some of the challenges landlords face in New York and elsewhere. Worries about a looming recession and higher interest rates have also seized up market activity and led companies to be more cautious with their leasing plans.

Tech giants including Amazon and Facebook parent Meta have announced plans to pull back on real estate or other expansions. The tech sector cutbacks have recently been noted by developers including SL Green Realty, Manhattan’s largest office landlord, and Vornado Realty Trust.

Against that backdrop, the addition at 295 Fifth seeks to make the building more enticing to corporate tenants by bringing the formerly 17-story building to 19 stories and creating a terrace — with looming views of the Empire State Building a few blocks to the north and One World Trade Center much farther away to the south — where a formerly underused rooftop used to be. It’ll be for the use of the tenant taking up that floor.

Opened in 1920 by prominent builder George Backer, 295 Fifth’s redevelopment also included updated elevators and windows; a hotel-like lobby and lounge space filled with plants; a courtyard garden on the ground floor; and a separate outdoor terrace on a different floor also intended for use by that level’s tenant.

With most of the building floors offering at least 41,000 square feet to 44,000 square feet each, 295 Fifth is billing itself as one of just a handful with floor plates of at least 35,000 square feet and blocks of space spanning at least 250,000 square feet — that’s highly attractive to major tenants. Competing buildings, such as One Madison Avenue, the trophy tower across from Madison Square Park by SL Green, and Brookfield Properties’ Two Manhattan West on the far west side, have signed tenants such as IBM and Franklin Templeton as well as KPMG and D.E. Shaw, respectively.

295 Fifth “competed in the conversations” with One Madison Avenue and Two Manhattan West, according to Elliott Ingerman, founding principal at TIG, which led the 2019 purchase of the building with its partners. Some of those well-known tenants that have signed in those buildings also eyed 295 Fifth, he said in an interview with CoStar News, declining to specify the names.

Tishman Speyer’s Morgan North redevelopment located at 341 Ninth Ave. on the West Side is another rival property, as is the combined 555 Greenwich St., New York’s first speculative office project during the pandemic, and 345 Hudson St. in the Hudson Square market, according to Ingerman.

Companies “are trying to create an environment for their people where they will get people back to work,” Ingerman told CoStar News. “They feel they need to move to a cool neighborhood to get young people back. [Midtown South] is a cool funky neighborhood. ... The product we are trying to lease is a fully renovated building that takes into consideration of the challenges of bringing people back to the office.”

Still, prospective tenants are taking longer to make decisions because they are debating how best to redesign and use their office space, he said.

Even though redeveloping 295 Fifth was first inspired by tech companies long using their offices and amenities as a way to lure talent, Ingerman said it’s not dependent on the tech sector to lease up space.

“The reaction has been extremely positive” since most of the building opened to tours in late September and early October, he told CoStar News.

Overall third-quarter office leasing in Manhattan reached its highest level since the pandemic, led by large companies signing at well-located properties with appealing amenities in a so-called flight to quality. In another example of companies reinventing their workplace to entice workers back, SL Green recently said relocations have jumped to over 40% of its third-quarter leases, up from typically only 30% of leases signed.

Vornado on Tuesday noted a continued divide in demand for older commodity buildings in need of upgrades and Class A properties.

Speaking to the allure of the Midtown South market, the area for the first time in decades beat midtown Manhattan, where steel-and-glass buildings have long been the hallmarks of New York’s office market, as the most expensive office cluster in the first quarter, according to a Colliers report. Ingerman defines Midtown South as south of 34th Street and to the north of Canal Street, while Colliers defines it as south of 40th Street.

Among Class A buildings, a Transwestern report recently showed Midtown South commanded the highest average per square foot of $84.56 in the third quarter, above Midtown's $82.12 and Downtown’s $57.61.

Since the summer, 295 Fifth has been “going back and forth with three groups for large blocks of space,” Ingerman said, adding one prospective tenant is seeking 300,000 square feet to 350,000 square feet while the other two are eyeing footprints of 120,000 to 160,000 square feet each. The property also has started to talk to smaller- and medium-size tenants seeking 60,000 square feet and 80,000 square feet, he said.

Ingerman’s bet on 295 Fifth comes as the NoMad area, where the building sits, has seen a transformation in recent years in becoming a live-work-play hub. There are about a dozen hotels within two blocks of the building as well as restaurants and bars nearby, Ingerman noted.

“Why is that important?” he said. “These young people want to be able to go out and drink and have lunch. All these hotels have beautiful rooftop terraces and restaurants. It’s creating a very exciting environment.”

A case in point, the Ritz-Carlton luxury hotel brand, billed as “the gold standard of hospitality,” in July opened its second Manhattan location in NoMad in an attempt to attract young affluent travelers.

The broader NoMad and Flatiron neighborhood last year attracted Microsoft to another building, 11 stories, more than a century old and a 12-minute walk south on Fifth Avenue. The Flatiron and NoMad district’s leasing volume in the third quarter jumped nearly 74% to 845,000 square feet from a year earlier and nearly three times the pre-pandemic level in the third quarter of 2019, according to the Flatiron NoMad Partnership, an area business improvement district.

Return-to-office rates in Flatiron and NoMad continued to increase and have surpassed citywide trends, according to the BID, which said a rise in foot traffic and subway ridership within the neighborhood led to 60 ground-floor retail shops opening in the third quarter alone, including many fast-casual restaurants.

To respond to the demands of today’s tenants, 295 Fifth turned down a bank retail tenant’s request to extend its lease as the building plans to feature food and beverage as well as fitness and wellness retail tenants, Ingerman said.

At 295 Fifth, prospective tenants run “a full gamut,” according to Ingerman. They include financial, legal, fashion, media and tech companies coming from different parts of Manhattan, including Midtown South and Midtown.

He expects the building, with asking rents of $95 to $135 per square foot, to have finalized “a couple of transactions” by the fourth quarter or the first quarter next year, he told CoStar.

“People are trading up,” he said. “It’s not like we are competing with 20 properties. We are competing with two or three. If you want a good product, you are going to pay for it.”