It’s a bad week to be a New York City office landlord.
In the wake of President Donald Trump’s announcement of new tariffs on foreign imports, Vornado Realty Trust, SL Green Realty Corp., BXP and other publicly traded real estate firms have seen their stock prices crater faster than the general market.
This week the S&P 500 index fell just over 6%. But BXP, Vornado, and SL Green saw their stock prices fall by 9%, 10% and 12%, respectively, during that same period.
The concern from the market is that tariffs could lead to an economic slowdown that would weaken demand for office space, said Floris van Dijkum, managing director of REIT research at Compass Point.
“The concern that people have now with tariffs is, does this mean that demand for office is going to go down? Particularly if banks are going to be seeing less capital market activity and they’re going to be laying off people,’” he said.
Although analysts were already expecting negative earnings growth for office landlords this year, the recent downswing could put more pressure on those numbers and even potentially lead to layoffs, van Dijkum said.
“At some point, do these stocks become attractive enough? Probably,” he said. “But I think everyone wants to wait and see.”
The office sector was already facing negative headwinds as corporate employees pushed for flexible telework policies after the pandemic. New construction is now incredibly expensive to build and underwrite, said Alexander Goldfarb, managing director and senior research analyst at Piper Sandler, as the sector has been hit hard by inflation.
“Tariffs are just another thing on top of that,” he said.
The market for office space has so far been driven by a resurgence in demand for Midtown. Commuter-friendly, highly-amenitized buildings near Park Avenue have become their own submarket success story in the post-Covid recovery, Goldfarb said.
“If you’re on Park Avenue, there’s very little space,” he said. “If you want to go to Lower Manhattan, you can name your price.”
Vornado’s big project in the area has been its building at Penn 2, located directly above Penn Station. BXP is planning a tower at 343 Madison Avenue. SL Green’s 1 Vanderbilt opened in 2020. In addition, RXR hopes to build a tower next to Grand Central Terminal at 175 Park.
