The New York Office Renaissance: Edward L. Shugrue III on Real Estate's Diverging Future

Int'l Business Times

2 days ago

Signs of revival are emerging, although unevenly, across key urban markets after years of uncertainty and dire predictions about the office sector's future following COVID. A recent billion-dollar transaction in New York City, the heart of one of the world's most scrutinized commercial real estate hubs, attests to this, injecting confidence into a sector many had prematurely written off.
Edward L. Shugrue III, Managing Director at RiverPark Funds, believes that a resurgence in top-tier leasing activity and high-profile property sales suggests that a more nuanced and perhaps opportunistic landscape is taking shape. He offers expert insights, drawing from decades of experience navigating commercial real estate.
Shugrue is a seasoned voice in the field, with over 30 years of experience in the commercial real estate investing, lending, and restructuring sectors. As the Portfolio Manager of a fund comprised of floating rate commercial mortgage-backed securities (CMBS), a $1.8 trillion market, his view into market behavior is granular and strategic. His tenure includes leading roles in the restructuring of distressed assets, pioneering commercial mezzanine finance platforms, and overseeing investment strategies.
Known for his analytical rigor and operational expertise, Shugrue has also extended his impact to academic settings, where he has contributed case studies and lectured at leading universities. His foundation in public and private market investment allows him to assess cycles and capital flows with clarity.
That clarity is critical, especially in today's commercial real estate environment. The office market, particularly in dense urban centers like New York City, is undergoing a bifurcation. Shugrue has witnessed how the decline in office occupancy during the pandemic led many to believe the sector was in secular decline. He argues that such generalizations fail to capture the real story. "New York is far from dead," Shugrue says. "It's simply a tale of two cities, the top-tier assets that are thriving, and the others that are struggling."
Recent news backs this up. The Manhattan commercial office market received a welcome boost with the announced sale of 590 Madison Avenue to Scott Rechler's New York-based RXR. After fierce bidding from an array of well-heeled institutional investors including Tishman Speyer (the owner of Rockefeller Center), one of Manhattan's largest office landlords, SL Green Realty (NYSE: SLG), and global private equity giant Blackstone (NYSE: BX), RXR emerged on top with a price of nearly $1.1 billion. The interest and activity in the property is consistent with increased leasing activity in Manhattan (nearly 12 million square feet of signed leases in the first quarter of 2025) since reaching pandemic lows.
Formally known as the IBM Building, this one million square foot gleaming office tower sits prominently at 57th and Madison Avenue, sharing the same block as Tiffany & Co's flagship on Fifth Avenue. It boasts a roster of leading finance and investment firms, including Apollo Global Management (NYSE: APO), which recently signed a 100,000 square foot lease. Asking rents at the property are $190 per square foot.
The pending sale is noteworthy for multiple reasons. First, it's the largest sale in Manhattan since Google's acquisition of 550 Washington Street in 2022 for nearly $2 billion. Second, with only $5 billion of Manhattan office sales in 2024, this sale will be a significant contributor to 2025 sales levels. Third, the price translates to over $1,000 per square foot, which, while common pre-pandemic, hasn't been seen here for quite some time.
This transaction is on the heels of two large and noteworthy office transactions in 2024. First was the sale of an 11% stake in one of Manhattan's newest skyscrapers, One Vanderbilt, to the Mori Building Company of Japan at an implied valuation of $4.7 billion. Second was Tishman Speyer's $3.5 billion refinancing of their historic Rockefeller Center.
Additionally, the Paramount Group, Inc. (NYSE: PGRE) recently announced that it is seeking strategic alternatives to maximize shareholder value for its $8 billion portfolio of Class A office buildings in New York and San Francisco. With 11 Class A towers within New York City, many of which are in midtown on Sixth Avenue, interest is expected to be keen.
However, Shugrue notes that while the outlook and tone have been strong, the demand is sharply skewed. Class A properties, those offering premium amenities, prime locations, and modern infrastructure, are experiencing strong interest and competitive bidding. Meanwhile, Class B and C assets, those situated away from central business corridors, are languishing in foreclosure or trading at distressed values.
This divergence has become a defining characteristic of the market. "Some assets attract global capital and command prices exceeding $1,000 per square foot. Others, although they're just mere blocks away, are nearly abandoned." The industry expert states that this isn't only a matter of location but of a broader realignment in tenant expectations and investment strategy.
Shugrue has observed that the appetite remains strong for Class-A towers offering the right mix of quality, location, and technology. However, buildings that fail to meet these changing standards are being repositioned for alternative uses, most notably residential conversions. These projects signify a shift in how underperforming office assets can be reintegrated into urban spaces.
As the 590 Madison Avenue sale and recent robust New York City leasing activity demonstrate, big transactions are back in the Big Apple. However, unlike the pre-pandemic world, the tide is no longer lifting all boats equally. Edward Shugrue's insights are a reminder that discernment is the differentiator in a fractured market. The next wave of opportunity won't emerge from sweeping generalizations about the office market but from a disciplined understanding of where capital, tenants, and cities are headed.