HRA paying skyscraper prices for bare-bones office building
An embattled city agency is renewing a huge office lease in a bare-bones, century-old office building for as high a rent as many top-flight financial and law firms pay in new skyscrapers, according to the city’s own official publication.
The City Record Online says the Human Resources Administration is poised to renew its lease for 264,358 square feet at Gould Investors’ 109 E. 16th St. at a starting rent of a whopping $76.83 per square foot. Under a current lease soon to expire, the city is paying under $30 a square foot.
The annual rent of $20.311 million in a 1909-built structure is as much on a per-square-foot basis as many Wall Street and legal firms are paying at modern buildings in the heart of Midtown and at brand-new towers at the World Trade Center.
But that’s just the start. HRA’s rent will begin to rise as soon as “alterations and improvements” to the space — for which the city will pay up to an additional $13.89 million, according to the City Record — are completed.
The agency’s rent will then jump to $82.12 per square foot through June 10, 2023 — and then to $91.15 from June 11, 2023, to June 10, 2028.
The rent in the 20-year lease’s final phase will mushroom to $112.28 per square foot from 2033 to 2038.
“These numbers are over the moon,” said a prominent commercial broker who would not let us use his name because his clients have business before the city.
The deal must still be finalized by the city’s Department of Citywide Administrative Services, which negotiated the lease for HRA as it does for other city agencies.
The $82-per-square-foot rent compares with average Midtown South Class-B asking rents mostly in the low $60s, according to a recent JLL market update. And most tenants paying that much are profit-making media, creative and financial firms, not city agencies.
The sprawling HRA employs more than 14,000 people and administers 12 major public assistance programs with a $9.7 billion annual budget.
The agency, headed by Mayor Bill de Blasio appointee Steven Banks, has been under fire over, among other things, its policies on sheltering homeless people and reduction of “workfare” requirements for welfare recipients.
HRA has had a presence at brick-and-masonry 109 E. 16th St., which is also known as 35-45 Irving Place, since the early 1990s.
It has occupied the entire 12-story building in recent years.
In October, we reported that a City Hall hiring frenzy was driving several city agencies to take more space — such as at 180 Maiden Lane, where a new, 275,000-square-foot lease for the Department of Investigation represents an expansion of 75,000 square feet over five locations from which it plans to consolidate.
But the asking rents at 180 Maiden Lane — a modern, 1980s tower that recently underwent a $28 million capital upgrade — are in the range of $40 to $70 per square foot.
On Saturday, my colleague Lois Weiss reported that Spotify is considering a move to One and Four World Trade Center — where asking rents are $69 and $70-plus per square foot, respectively.
HRA reps would not speak for the record. They suggested the rents cited in the City Record are misleading because they don’t take into account what landlords and tenants call the “loss factor,” which reflects that usable square footage may be less than the stated size.
A source close to the HRA situation said the landlord had recently “recounted” the building at 344,000 square feet, which would mean the agency’s rent at 109 E. 16th St. would be under $60 a square foot based on the miraculously enlarged floor area.
However, public records have always listed the building as having about 288,000 square feet. In fact, the website for Majestic Property Management Corp., a Gould Investors affiliate which operates 109 E. 16th St., clearly describes it as having “a total square footage of 287,000 square feet.”
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