Global flexible workplace provider WeWork has inked one of Manhattan’s largest office leases this year through a partnership with tech giant Amazon.
WeWork leased about 304,000 square feet at 330 W. 34th St., with the space to be occupied by Amazon, a WeWork spokesperson told CoStar News. Amazon is already a WeWork enterprise member and occupies other WeWork locations, including at 1440 Broadway, just a few blocks south of Times Square, also in New York.
An Amazon spokesperson didn’t immediately respond to a request for comment from CoStar News. Vornado Realty Trust, which owns 330 W. 34th St. as part of its Penn District portfolio surrounding the Penn Station transit hub, declined to comment.
“This collaboration underscores our commitment to sustainable growth and meeting the diverse needs of our clients where they need us most,” the WeWork spokesperson told CoStar News, adding the property is located in “one of the city's most dynamic and rapidly evolving" commercial hubs.
WeWork's space at the redeveloped building will feature “amenities designed to optimize productivity, encourage collaboration, and offer a seamless, flexible work experience,” the spokesperson said.
The deal comes as Amazon CEO Andy Jassy said in September that employees are expected to be back in the office five days a week come Jan. 2, part of a slew of major employers, including Dell Technologies and banking heavyweight Citigroup, that have also announced stricter in-office mandates.
Amazon's footprint in New York includes leased office space at several properties, including Brookfield Properties’ Five Manhattan West at 450 W. 33rd St., where it occupies more than 285,000 square feet, according to CoStar data.
The company also opened its New York flagship at the former Lord & Taylor department store building it acquired and redeveloped at 424 Fifth Ave..
Major office developers including BXP, whose portfolio includes Manhattan’s iconic GM Building by Central Park, and SL Green Realty, Manhattan’s largest office landlord, have said stricter in-office requirements bode well for the sector.
“Clearly a return to office mentality are bringing a lot more people back and forcing some of these existing tenants to come back into the market where they had laid off space because they thought they were going to have a more robust hybrid work environment and now they're bringing the bodies back,” Steven Durels, SL Green executive vice president, said on the company’s third-quarter earnings call in October.
In a growing sign of tech tenants returning, the combined size of active tech tenant searches in the city has doubled to more than 6 million square feet from the same time a year earlier, he added.
Largest leases
The WeWork lease ranks as the third-largest office deal in Manhattan in November after law firm Ropes & Gray’s 430,000-square-foot lease last month at 1285 Ave. of the Americas. The WeWork lease would also rank as one of the 10 largest in Manhattan for the year, according to CoStar data.
The second-largest lease last month was by another tech giant, Apple, in its extension and expansion spanning nearly 398,000 square feet at Penn 11, also part of Vornado’s Penn District, according to a report from Colliers. These leases combined will contribute to Manhattan’s pandemic-hit office market to have its strongest year in 2024 since 2019, the Colliers study found.
But signs of improvement aside, the office market in Manhattan — the largest U.S. office cluster and a barometer for the rest of the country — remains bifurcated as brokers and analysts have pointed to a glut of often low-quality or older space that presents challenges.
The city’s office vacancy rate still is near a record high of close to 14%, CoStar data shows.
Manhattan office buildings saw the average visit rate in October rise to 74% of 2019's pre-pandemic level, up from 71% a year earlier, according to a study from the Real Estate Board of New York. But in an illustration of the bifurcation trend, the highest-quality properties saw the biggest improvement in visit rates, with average building visitations rising to 85% in October, up from 78% a year earlier.
The lease comes after WeWork emerged from bankruptcy protection in June. In October, WeWork announced it would expand into North America's suburbs, but not through signing expensive leases at the cost of profit — the operational strategy that led to its previous financial troubles.
While the likes of Amazon are installing stricter in-office mandates, industry professionals have said the hybrid and remote working trend is here to stay and has spurred demand for flexible workspace. Companies are adjusting their space needs but also seek to bring their employees amenities offered by the likes of companies such as WeWork.
The majority of remote, hybrid and fully in-office companies said they plan to increase their office space in the next two years, primarily through flexible workspace, according to a September survey of 500 business decision-makers in the United States and the United Kingdom conducted by WeWork. For instance, 59% of companies that plan to expand their workspace in the next two years chose flexible space over traditional offices, including nearly three-quarters of remote companies.
WeWork isn’t the only flexible workspace provider seeking to expand its members’ access. Major rivals including Spaces' parent IWG and Industrious have also been expanding, including taking over some former WeWork locations in markets including its hometown of New York.
The total number of U.S. coworking spaces at the end of the second quarter rose by 444 from the first quarter to reach 7,041 spaces, according to industry tracking site CoworkingCafe, adding that the number of U.S. coworking spaces rose 7% in the second quarter after a 6% growth in inventory in the first quarter.
The Commercial Observer earlier reported the WeWork lease.