Although the leasing market in Manhattan has improved, particularly in midtown, Third Avenue has remained a weaker sub-market that has seen some of the starkest rental declines from the peak levels of pricing before the downturn. If Pfizer was dissuaded from subleasing by the weak rents it can get for the space and the continuing lack of demand for big blocks of space, the investment sales picture in the city appears to have given it encouragement to try the auctioning block.
The sales market has been largely frozen and the handful of buildings that have come available in recent months have been met with fierce pent up demand from buyers who have been eager to make acquisitions but have seen little product come to market to invest in so far.
The Stacom and Shanahan team at CBRE, perennially one of the city’s top sales groups, have been at the forefront of brokering what few opportunities there have been so far. Perhaps most notably, the pair sold three separate office buildings in recent weeks, 600 Lexington Avenue, 340 Madison Avenue and 125 Park Avenue, at prices that exceeded expectations and appeared to set new benchmarks of value since pricing deteriorated amid the recession.
Although 685 Third Avenue is one among a short list of towers to come to market during a period when investors are clamoring to enter the Manhattan market, the deal would appear to include the kind of risks that buyers usually seek a discount to take.
Pfizer plans to relocate all of its staff from the tower to two other buildings it owns nearby, 235 East 42nd Street, a 33-story, 640,000 square foot building, and 219 East 42nd Street, a 300,000 square foot building. According to Joan Campion, a spokeswoman for Pfizer, the company is also moving jobs from 685 to facilities it has in Madison, NJ, Peapack, NJ and Collgeville, PA.
Last year, George Comfort & Sons, a real estate investment firm, purchased a large office tower on the other side of midtown, 825 Eighth Avenue, a 1.8 million square foot tower that it has hundreds of thousands of vacant square feet that it have yet to be filled. In recent weeks, there has been growing chatter that the owners could be getting closer to securing a big tenant for the space in what could be an important sign of a pickup in rental activity that would perhaps bode well for 685’s vacancy and make it more attractive to buyers.
Pfizer purchased 685 Third Avenue in 2003 and subsequently renovated portions of its space, investing a total of about $400 million according to written reports.