First Full-Block Tower To Open in Decades on Manhattan’s Park Avenue Tests Iconic Corridor’s Appeal

Park Avenue, long Manhattan’s corporate headquarters-heavy corridor, has officially added its first full-block tower in half a century, a project that took about 18 years to complete. The building not only demonstrates the importance of perseverance among developers and the type of offices now in demand, but it will test the area’s staying power in a changing New York City.

Developed by private real estate firm L&L Holding along with its co-equity partner and co-developer Tokyu Land Corp. from Japan and co-managing partner BentallGreenOak, 425 Park Ave., between East 55th and 56th streets, marked its completion this past week.

Designed by Pritzker Prize-winning architect Norman Foster after his firm won a competition that attracted submissions from 11 world-famous architects, the 47-story tapered tower rises 897 feet to the top of three illuminated ornamental fins perched above a 38-foot-tall penthouse floor.

It features a 45-foot-tall lobby, lots of column-free space and two triple-height floors constructed on a diagonal grid, or diagrid, a framework of diagonally intersecting beams that requires less steel than a conventional frame.

And at 85% leased, 425 Park Ave. is the latest example of top-tier properties benefiting from the so-called flight to quality trend even as New York’s office market is still contending with record-high vacancies.

The uppermost diagrid on the 26th floor serves as the the Diagrid Club, open to all tenants. It features a coffee bar, kitchen, dining area and private event service with food and beverage operations to be overseen by the celebrity chef and restaurateur Jean-Georges Vongerichten, who also plans to create a two-level restaurant at the base of the the 670,000-square-foot building.

The floor also features outdoor terraces and an art installation from Japanese contemporary artist Yayoi Kusama as well as private rooms for transcendental meditation by the David Lynch Foundation.

The tenant list speaks to New York as a global financial hub, packed with a variety of investment firms. Global asset management firm Citadel, the hedge fund founded in Chicago by billionaire Ken Griffin, is the anchor tenant of the 47-story tower after being the first to sign on back in 2015. Citadel has recently expanded its footprint at the building to about 415,400 square feet across 20 floors, according to L&L. Other notable tenants include investment management firms Wafra Capital Partners and Maverick Capital, private equity firms Hellman & Friedman and GTCR, and healthcare real estate investment trust Medical Properties Trust, L&L said.

Calling the building a “once-in-a-lifetime” project, L&L CEO David Levinson said at a panel discussion at the Diagrid Club on Wednesday that L&L first saw an opportunity in 2004 to tear down an existing “undistinguished building” on the site and develop a new tower. Levinson said L&L found there was a ground lease expiring on the site in 2015, which is a “very rare thing” in New York.

The firm started buying the land in 2004 before many other complications and what he described as an attempt to “build the unbuildable” that eventually led to the June 2015 groundbreaking and the completed tower today, Levinson said.

The building is opening at a time when there’s increased concern about a looming recession that has led tech and some other companies to pause office leasing or other expansion plans. The pandemic also made commonplace the remote working trend and hybrid schedules of showing up to the workplace just some days of the workweek, a phenomenon that has raised questions about the future of offices.

While the building is newly opened, a lot has happened in the Manhattan commercial property landscape while it’s been built. There are signs that Park Avenue and the broader Plaza District may have lost some luster over the past decade to the likes of Hudson Yards, Midtown South or lower Manhattan, areas corporate tenants, seeking to attract young talent, now consider to be more of a live-work-play domain instead of a nine-to-five business district.

Still, lunch crowds spilled out of buildings one day last week on Park Avenue, with lines forming for food trucks. And construction on JPMorgan Chase’s new global headquarters is underway just a few blocks south of 425 Park.

With its amenities, outdoor space and easy transit access, companies see properties such as 425 Park as crucial to help them attract talent and entice workers back to the office.

“Most of the leasing that takes place in New York takes place in the best buildings,” L&L President and Chief Investment Officer Robert Lapidus said in an interview. “Commodity buildings are going to be in trouble here and everywhere else. The top 20% to 25% of office buildings around the country are going to do generally very well. The rest of the office stock is really going to suffer. We’re at the beginning of this new trend that got accelerated by a global pandemic.”

L&L, founded in 2000 by Levinson and Lapidus, is also behind other famed New York projects, including TSX Broadway in Times Square.

Tenants that have signed on at 425 Park are paying anywhere from the mid-$100s to $300 per square foot, Lapidus told CoStar News, adding the remaining space at the building, with views of Central Park, midtown Manhattan and some other parts of New York, is asking for over $200 a square foot. Even with all the market variables, Lapidus said he’s not concerned about L&L’s ability to lease the remaining space, adding L&L has “had conversations” with prospective tenants.

In contrast, at the Plaza District, the priciest office market in New York not to mention the largest both in New York and the United States, the vacancy rate of 14.2%, while having declined from a record high of 15.25% in the third quarter of last year, is above even New York’s record-high vacancy rate of 12.3%, according to CoStar data. Market rent per square foot in the Plaza District has declined to $90.2 per square foot from a record high of $94.3 in the fourth quarter of 2019 pre-pandemic. Citywide, market rent declined to $57.34 from $60.33 during the same time, CoStar data showed.

“There has been for a long time now a movement all around the city,” Paul Goldberger, a Pulitzer Prize-winning architecture critic, said in an interview, pointing to the example of Citigroup having relocated to lower Manhattan from the area. “Park Avenue may be unique, but it isn’t necessary in the way it once was. … A lot of the buildings [in New York] are out of date.”

He adds that “people are questioning the city, people are questioning work in the traditional way, and that will continue to evolve. But this building has been designed to try to be a step ahead of that and not be behind it. In that sense, it has a greater likelihood of being attractive 50 years from now than many of the other buildings on Park Avenue. … As a piece of architecture, it’s incredibly refined, elegant and beautiful. It will sit on Park Avenue with a kind of dignity and exuberance.”

Companies including KPMG, D.E. Shaw and HSBC have recently announced their plans to relocate from the Plaza District and other adjacent midtown Manhattan markets. But these neighborhoods, with easy access to Grand Central Terminal and Central Park, still have its appeal. One Vanderbilt, the trophy tower of SL Green Realty, Manhattan’s largest office landlord, is almost fully leased with per-square-foot rents topping $200 at the higher end.

“There’s only one Park Avenue,” said Foster, the architect, at the panel. “What makes Park Avenue unique is not just in New York but in the world. It has a very powerful identity. … [While] a student at Yale in master’s class, I came here. It’s a pilgrimage.”

Foster’s firm also designed JPMorgan’s new headquarters.

When it comes to 425 Park’s amenities, there’s a reason why, instead of a gym, private rooms for meditation are among perks featured on the Diagrid Club floor.

“Most of the people in the hedge fund and private equity world meditate,” Lapidus said. “They [don’t] really care about having a common gym. … You don’t want competitors comparing notes on a treadmill next to each other.”