A prominent office skyscraper in New York is welcoming an atypical tenant to fill a big part of its newly renovated space. In so doing, it’s offering a glimpse of how alternative renters can help fill vacancies in the city, the biggest U.S. office market.

Touro University, the largest private U.S. institution of higher and professional education under Jewish auspices, leased nearly 310,000 square feet across 11 full and partial floors at 3 Times Square. Since January, the tenant that may seem an unlikely choice for the New York tourism and entertainment district has been bringing 2,000-plus visitors daily to the building.

Touro’s occupancy at the tower built more than two decades ago as the North American headquarters of media giant Reuters Group comes as both Times Square, the 24-hour hub known as the “Crossroads of the World,” and the city's office sector struggle to reinvent themselves to recover from the pandemic's economic damage.

Touro, the largest tenant at 3 Times Square, wasn’t the usual tenant that building owner Rudin had in mind to fill space at the corner of 43rd St. and Seventh Avenue right across from 1 Times Square, where the world-famous New Year’s Eve ball drop takes place.

“In a world that’s evolving and up and down, conventional wisdom gets put on the side. You do have to think outside the box,” Rudin CEO Bill Rudin said in an interview. Touro “adds a bit more vibrancy” to Times Square, he said.

He expects the building, which recently completed its overhaul and is 50% leased, to be about 70% leased in the next few months. There have been “a lot of showings,” he said, with prospective tenants from industries including fashion and media as well as accounting and law firms.

“There are definitely headwinds in the commercial market,” Rudin said. “What’s happening is a flight to quality. That’s the underlying theme. We’ve got significant activity on other floors. Buildings that have the right ownership and amenities are still very vibrant.”

Touro’s lease also reflects the diversification of Manhattan’s office occupiers toward areas of education, bioscience, life science and medical beyond the traditional finance, and technology, advertising, media and information, or TAMI, tenants, Rudin told CoStar News. “We are seeing more interest from higher educational institutions looking for space and upgrading their facilities,” Rudin said.

“The continued diversification of the tenant base ... this is what’s unique and special about New York,” he said. Other new tenants Rudin has signed at 3 Times Square include the accounting firm Anchin, Block & Anchin and French liquor company Rémy Cointreau.

Rudin isn't the only owner of a newly renovated building that's luring higher education tenants. During the pandemic, the 160-plus-year-old St. Francis College signed a 30-year lease spanning about 255,000 square feet to relocate to a new 10-story office tower above Macy’s in downtown Brooklyn in a bid to be more competitive.

NYU Langone, meanwhile, renewed a roughly 595,000-square-foot lease at Vornado Realty Trust’s One Park Ave. in late 2020 after adding nearly 54,000 square feet in a new lease in the building, according to CoStar data. That same year, it inked a deal spanning more than 195,000 square feet at 601-635 Lexington Ave., co-owned by Boston Properties and Norges Bank Investment Management.

And Pace University, for its part, signed a lease for about 215,000 square feet at 15 Beekman, co-owned by Manhattan’s largest office landlord, SL Green Realty. They rank among some of the city’s largest office leases since the start of 2020, according to CoStar data.

Educational services is one of the industries that’s had employment growth in New York since before the pandemic through February of this year, against declines in other industries such as retail and lodging as well as total private sector employment in the city, according to a March report published by the New York City Economic Development Corp.

Educational services employment in the United States has grown an annual average of 3.5% between 2018 and 2023, more than doubling the total U.S. employment growth of 1.6% during the same time, according to research firm IBISWorld.

Not all office owners embrace the idea of carving out space in their best buildings for schools. But Jeff Rosengarten, Touro’s senior vice president of operations in charge of real estate planning, said Rudin was open to it when first approached in 2019. Other landlords weren’t, in part because of the perception students could be unruly, he said.

“We needed a building where we can create our own entrance to [have] a building within a building,” Rosengarten said in an interview. “We needed a building with high ceilings and very few columns and sufficient elevators to accommodate a large number of faculty and students. We also had to afford it. Also we want lower floors. There aren’t many buildings in midtown Manhattan that met all those qualifications. When I came to look at it, a lot of the checkmarks were checked off.”

Since the deal was struck during the pandemic, the university has gut-renovated the space that Natalya Vidokle, Touro’s director of campus planning and design, said used to be office floors, trading floors and computer server rooms. Touro added stairs to connect the floors of the vertical campus while many communal spaces and lounges were added by the windows where the neon lights of Times Square were constantly reflected. Windows that give various vantage points of the hustle and bustle outside are common features of classrooms, research labs, faculty offices and a mock pharmacy.

“You always have Times Square as a reference point,” Vidokle told CoStar News. “You get these lights and billboards. You have this awareness that you are in Times Square.”

Even when an outside billboard blocks a window view, a big video screen broadcasts the live feed of the Times Square action outside in a lounge space that features an Amazon Go-like cashierless store.

Eight of Touro’s schools that are being housed at 3 Times Square include the College of Pharmacy, New York School of Career & Applied Studies, its Graduate School of Business, and Graduate School of Education.

“As a professor, it’s just a dream,” Dr. Shifra Leiser, an assistant professor at the School of Health Sciences, told CoStar News. Leiser adds as some of the positives the “state of the art lab” space for students and technology to accommodate Zoom meetings in each classroom: “It’s a location where we can invite participants and students in to do mock and simulation lab. It’s a central location to hold workshops and continued educational classes. The location is super convenient and is close to all the trains and the Port Authority" bus terminal. And "you can have lunch anywhere around here."

That’s welcome news for businesses in Times Square, where foot traffic has been rebounding since it was made a ghost town at the start of the pandemic.

In February, the number of average daily visitors in Times Square totaled 242,803, almost tripling the 2021 level and just 21% shy of the pre-pandemic level in 2019, according to data from business group the Times Square Alliance.

“Times Square is regularly seeing over 300,000 and some days 400,000 people a day pass through,” Tom Harris, president of the alliance, said in an emailed statement to CoStar News.

Though only 0.1% of New York’s land area, Times Square supports nearly 10% of the city’s jobs and generates 15% of its economic output, according to the alliance.

The staff and students working and attending class “provide a major economic boost to local businesses, revitalizing an area traditionally frequented by tourists and office workers,” the school said in a statement. And students want to show up in person, Dr. Alan Kadish, the institution’s president, added in an interview.

“Our students have been incredibly excited both about the physical facility and the location," Kadish said."We got a lot of feedback from students who previously said, ‘I thought about being remote.’ Then they come to the building. With the energy and excitement of the neighborhood and the great facility, they say, ‘We want to come to the class.’”