Ed Piccinich, chief operating officer of developer SL Green Realty Corp., is bullish about prospects for the office market in New York City and elsewhere as the COVID-19 Omicron variant wanes and companies activate return to work plans. As they do, tenants in SL Green’s 27-million-sq-ft portfolio of city office spaces will be in for some pleasant surprises.
That’s because New York City’s largest commercial landlord hasn’t sat on its hands over the past two years. During the pandemic, SL Green rolled out an array of improvements ranging from the latest air filtration systems to deluxe amenity centers—all meant to keep current tenants happy and to attract new ones.
The real estate giant also delivered One Vanderbilt, a 77-story office tower in midtown Manhattan, in 2021 and began work on the 27-story One Madison office project.
“As a landlord, we have always been in a business that’s about making buildings better,” Piccinich says. He notes office occupancy in New York rose 3% in February, to 34%, according to Kastle Systems’ latest Back to Work Barometer—supporting his optimism that tenants are starting to come back.
A crew member is seen during construction of One Vanderbilt, which won several Best Projects awards from ENR.
Photo by Max Touhey
Commitment to sustainability
Despite challenging times in general for commercial real estate companies, SL Green’s combination of high-quality new development and intensive upgrades to existing buildings appears to be paying off. For the year ending Dec. 31, 2021, the real estate firm reported net income for common stockholders of $434.8 million, or $6.50 per share, compared with net income of $356.1 million in 2020.
SL Green, which has about 1,300 employees in operations and in maintenance of its portfolio, formed a sustainability group in 2007 and began taking part in various state and local panels. The company first earned a LEED certification in 2008, for the 100 Park Ave. building. Over the past decade, the real estate investment trust has boosted its number of buildings with that certification to 20. Overall, 91% of its portfolio in Manhattan is LEED certified. SL Green also has an ownership stake, through debt and equity, in another 7.1 million sq ft of city office space.
These sustainability efforts have paid off with a 30% reduction in carbon emissions per sq ft since 2012.
One Madison is SL Green’s current major office project.
Photo by Max Touhey
“We are committed to being environmental stewards of our buildings and of New York,” said Alvis Yuen, vice president and assistant director of sustainability at SL Green.
The tower owner has also managed to slash energy use by 20%, beating by several years a 2030 target date that the company had set for itself. Today the developer issues an annual sustainability report, detailing its commitments to reducing energy use and where it stands in meeting its objectives.
A prime example of its dedication is the company’s rollout last year of its $3.3-billion One Vanderbilt office tower. SL Green and its contractors built the tower with 90% recycled steel rebar. The building features a 1.2-MW cogeneration electric system, high performance glazing on its glass panels and a 150,000-gallon tank and detention basin to collect rainwater for reuse.
The basin has the dual purpose of reducing flow into the city’s sewer system during stormy weather while providing water for cooling towers and other purposes. High efficiency restroom fixtures in the tower are designed to reduce water use by 40%.
One Vanderbilt, which abuts Manhattan’s Grand Central Terminal, is also an example of transit-oriented development that is another key element of sustainability. The real estate investment trust agreed to pump $220 million into a range of transit improvements.
A 14,000-sq-ft pedestrian plaza was created by closing off part of Vanderbilt Avenue between the 77-story building and Grand Central, with a car-free space linking the two. Under the tower, SL Green built a 4,000-sq-ft public transit hub that helps commuters connect with four different transit lines.
The mix of sustainability and transit features helped One Vanderbilt earn both LEED v3 Platinum and LEED v4 Gold certifications, the company said. “We approach our sustainability program in a way that people know we are not just issuing a mission statement that we don’t really execute,” Piccinich says.
One Vanderbilt received ENR New York’s 2021 Best Project award for office, retail and mixed-use construction and a merit citation for sustainability. The high-rise was also a finalist for regional Project of the Year.
SL Green says it makes its office spaces enticing with sustainable features like the green roof on 100 Park Ave.
Image courtesy SL Green
Boosting the tenant experience
Along with new development, part of SL Green’s market strategy has been to acquire existing buildings and make upgrades to everything from elevators to HVAC systems.
Over the past few years, the real estate firm said it spent $249 million on capital improvements of existing buildings, with about $104 million alone for elevator upgrades. Its more than $100 million on improvements to heating, cooling and mechanical systems include $36.1 million on cooling towers, $26.9 million on chiller upgrades, $20.8 million to improve induction units and other system boosts.
“They have a substantial budget citywide for capital improvements,” says Arthur Alzamora Jr., principal and vice president of environmental and engineering services at Langan, who has worked with SL Green on an array of projects. “Their budget just for improvements is equal to some of the biggest new developments in the city.”
SL Green has also invested considerable capital to expand amenities and the overall quality of tenants’ office life. Last April, the company achieved a WELL Health-Safety Rating at One Vanderbilt and across the 23 million sq ft of space it directly manages.
And another office property may soon be added to the its roster. Real Deal reported March 9 that SL Green is seeking to buy the 450 Park Ave. building from Oxford Properties and Crown Acquisitions for some $440 million. The firm declined to comment.
Amenities for the well-being of employees, like large outdoor roof decks at One Madison, may lure workers from their home offices.
Image courtesy SL Green
Meanwhile, SL Green Forward, the company’s overarching plan to deal with COVID-19 impacts, spells out new protocols and improvements in everything from building cleanliness, hygiene and water quality to needed tenant actions when an employee is infected.
The developer has strongly emphasized improved building air quality, upgrading air filters at the start of the pandemic from MERV 13 to MERV 15 and MERV 16. Tower and building lobbies now have air cleaners with HEPA filters for volatile organic compounds that “capture 99.99% of particles,” the company says.
Along with filtration, SL Green also boosted ventilation in all buildings, with air handling units now programmed to start earlier in the morning to “circulate outside air prior to occupancy,” the firm says.
“Air quality is something we have always been focused on,” SL Green’s Yuen says. “SL Green was ahead of the curve even before the pandemic.”
There also are more visible ways the company is pushing to elevate the tenant experience. One Vanderbilt has a major emphasis on maximizing natural light, with its floor-to-ceiling windows that measure 15 to 24 ft high, an extensive range of column-free floorplates and a public observatory with an outdoor deck that is the city’s second highest.
One Madison, the 27-story tower expansion and revamp that SL Green is building in a joint venture with National Pension Service of Korea and developer Hines, will also be heavy on fancy amenities when it opens in 2024. The new office address will include 13,000 sq ft of event space, a 9,000-sq-ft lounge-style space called The Commons and lunch and coffee bars. The tower also will be home to 15,000 sq ft of retail space and more than an acre of outdoor space.
At the renovated 100 Park Ave. building, which was constructed in 1949, an 11,000-sq-ft tenant amenity space opened in 2019 on the second floor that includes a golf simulator and fireplace. Says Piccinich: “It just gives another element for people to utilize instead of just sitting in an office.”
While SL Green has made its name in the city’s office market, it also has numerous projects for Pace University in Manhattan—delivering a 609-bed dormitory at 180 Broadway in 2013, followed by a 34-story, 772-bed dorm at the center of its campus at 33 Beekman St.
The real estate firm now is building a 215,000-sq-ft complex for Pace at 126-132 Nassau St., named 15 Beekman, that features a mix of dorms, classrooms, a dining hall, library and learning center. Dodge Analytics values the project at $100 million.
“SL Green is one of our favorite clients,” says Edward DePaola, president & CEO of Severud Associates Consulting Engineers, citing a long history of working together on projects. “They treat us with respect and professionalism, and we bend over backward for them.”
The firm itself was back in its offices in spring 2020, with a variety of Covid precautions. Employees needed to be on site to service tenants whose jobs also required them to be on site, like medical doctors and the MTA.
Marc Holliday, SL Green chairman and CEO, told clients via the firm’s interactive tenant guide: “We have done everything in our power to make certain that our properties are ready for you.”