Commercial real estate datapoint of the day
Deutsche Bank AG has agreed to sell Worldwide Plaza, a 1.8 million square-foot skyscraper in New York City, for $600 million to developer George Comfort & Sons and partner RCG Longview…
The sale price works out to roughly $330 a square foot.
Worldwide Plaza is a very high-class office building, home to, among other tenants, the swanky offices of Cravath, Swaine & Moore. It also has what until recently would have been something extremely attractive: a huge amount of unleased space (709,000 square feet, to be exact), vacated by the departing Ogilvy & Mather.
A year or two ago, long-term leases were poison for commercial real-estate valuations, since they reduced landlords’ ability to hike rents. Vacant space, by contrast, was like gold dust: prime midtown office space was leasing at well over $100 a square foot.
Today, everything has been turned on its head: those 709,000 square feet aren’t generating any income, and therefore have very little value. As a result, the 1.8 million square feet of Worldwide Plaza are worth just $600 million: by contrast, the $1.5 million square feet of 666 Fifth Avenue sold for $1.8 billion — or $1,200 per square foot — in 2006. On a price-per-square-foot basis, that’s a decline of more than 70% from the peak of the market.