Jones Lang LaSalle

> SPACE NYC 01 19 06
EOP RINGS IT UP
Peter Slatin

Equity Office Properties has had its troubles lately. The giant office REIT has not traveled the smoothest of roads in getting settled in Manhattan; it has been selling "non-core" properties like mad to cover a too-large dividend; and was finally forced to slash its dividend in December.

But its luck may be about to change. After coming under sharp criticism (mostly from envious runners-up) over its $505 million purchase of the Verizon Building at 1095 Sixth Avenue last year, EOP may be the first kid on the block – any block – to take advantage of a Manhattan office market bursting at the seams. Vornado president Michael Fascitelli predicted at an industry luncheon on Jan. 12 that " a spike in Manhattan rents" is in the cards, possibly this year though certainly within the next few years.

Cushman & Wakefield market stats put the Midtown vacancy rate at 7.8% at the end of 2005, with as few as five blocks of space of 250,000 square feet or larger. And financial services companies continue to grow.

EOP plans a $250 million-plus reskin and overhaul of the Verizon Building, yielding them a $750 million spec project as the market heats up.

Now EOP has unveiled extensive renovation plans for 1095 Sixth, budgeted at up to $260 million. The plans, designed by architects Moed de Armas & Shannon with Gensler, include a complete recladding of the 1 million-square-foot structure, possibly the largest such project ever in Midtown. The contractor for the project is Tishman Construction, which is also building the huge One Bryant Park for the Durst Organization directly across 42nd Street.

Indeed, market sources say that one possible anchor for the Verizon Building is Bank of America, which is taking 800,000 square feet at the Durst project but is in the market for more space and may want to straddle 42nd Street to create a campus. "Bank of America is in the market, and we're talking to everyone that is in the market," acknowledges EOP's Don Huffner, who runs the Northeast and Atlanta markets for the company.

The Verizon Building today.