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Investors are piling back into New York office buildings, lending billions of dollars to property developers in a sign big money managers see the return-to-office wave as a much-needed salve to the market.
Owners of four New York skyscrapers have tapped the commercial mortgage-backed securities market to refinance their debts in recent weeks, raising $3bn, according to documents reviewed by the Financial Times and data from Bank of America.
That has lifted borrowing tied exclusively to NY offices in the CMBS market to $11bn this year, with office financings in US securitised markets at their highest level since 2021, before the Federal Reserve began raising interest rates.
Importantly for property developers and the city, which depends heavily on the corporate sector for tax income, investors are opening their purse strings to buildings not considered trophy assets, including older towers. They see it as a sign debt markets are finally thawing for highly leased skyscrapers, particularly in crowded business districts along Sixth and Park Avenues, in Times Square and by Pennsylvania Station.
“Office is back,” said Mario Rivera, head of asset-backed securities at Fortress, a trend he put down to corporate policies demanding a return to in-person work. Pointing to a rebound on Sixth Avenue, a corridor filled with law firms, hedge funds and other financial institutions, he said “the market was shunning that space for a while but that’s no longer the case”.
Developers have clinched more than 20 CMBS financings backed solely by office properties in the US this year, up from eight for the whole of last year and none in 2023, according to BofA strategist Alan Todd. The CMBS market is just one place developers borrow to finance their properties.
Real estate developer Paramount raised $900mn in late July to refinance the debts of 1301 Sixth Avenue, home to French bank Crédit Agricole and law firm Norton Rose.
A few blocks north, Blackstone secured $850mn in debt in May, including more than $600mn through the CMBS market, as it invested alongside developer Fisher Brothers in 1345 Sixth Avenue. The tower is the future home of law firm Paul Weiss, which will pay about $81mn a year for the space, according to documents circulated to investors.
Apple’s New York City home opposite Penn Station was also refinanced by owner Vornado, raising $450mn. And the Durst Organisation clinched a $1.3bn financing backing the old Condé Nast and Skadden headquarters in Times Square, which it has since leased to companies including social media company TikTok and law firm Venable.
The deals point to a stabilisation in New York’s office debt market and a broadening of investor willingness to underwrite loans to developers. Last year and at the start of 2025, real estate businesses raised billions of dollars against a handful of marquee buildings, including a $3.5bn debt package for Rockefeller Center and a $2.9bn mortgage on The Spiral, a new building in Hudson Yards that houses HSBC.
The amount of office space available to lease has been shrinking as big companies expand in the city, according to real estate adviser CBRE. Midtown Manhattan availability rates dropped to 15.5 per cent in the second quarter from 18.2 per cent a year earlier.
Meanwhile, weekday use of the city’s subway system is rebounding, with average paid rides nearing 4mn a day, 72 per cent of pre-pandemic levels, according to New York’s Metropolitan Transportation Authority.
“Investors are seeing declining vacancy rates and net positive leasing trends . . . and saying maybe we’ve identified the floor in some of these markets,” said Matt Salem, head of real estate credit at KKR.
Salem added insurers had been big buyers of office debt this year, with investors seeking a slice of many of the NYC financings. KKR has purchased some $400mn of office-backed CMBS this year, he noted.
Investors nonetheless caution the recent dealmaking does not signal an all-clear in the office market and note the New York financings are all for buildings where a high proportion of space is already leased to blue-chip tenants, with properties that have not been renovated or are struggling to attract tenants still facing problems.
The deals also have lower leverage ratios than would have been typical before the pandemic, in a sign that lenders are requiring added protection to finance the transactions. In some cases, developers have invested extra equity in the property deals to make the debt balances more tolerable for creditors to underwrite.
“It is a tale of haves and have nots,” said Ben Hunsaker, head of structured credit at Beach Point Capital. “People are looking at availability in Park Avenue offices or Central Park view offices and are saying we can lend on this again . . . If you go out two blocks over it gets pretty ugly. I don’t know how much marginal demand comes for that.”
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