Vornado: Vornado declares work-from-home threat is over

Not long after the pandemic upended the world of work, Vornado Realty Trust CEO Steven Roth predicted people would soon return to the office.It took longer than he'd hoped, but on Tuesday Roth proclaimed the threat that remote work posed to his business, which owns 20 million square feet of Manhattan commercial space, is over."Work from home was a scare, but as we predicted it would not last and is not lasting," he said. "Most have left their kitchen tables and are back at the office."Workers haven't returned everywhere, though, and Manhattan's office vacancy crept up to 23.3% at the end of 2024, compared to 22.8% in 2023, according to Cushman & Wakefield. The vacancy rate is about half that in Roth's buildings, which include Bloomberg LP's headquarters at 731 Lexington Ave. and the newly redeveloped Penn 1 next to Penn Station. The vacancy rate fell by nearly a full percentage point in the fourth quarter, to 12%, according to results published late yesterday by Vornado. Rents for new leases came in 6% higher than expiring ones. An emboldened Roth predicted demand for prime Manhattan office space will only grow."We expect rents to go up significantly next year," Roth said. "Dare I use the word 'spike.'"Investors liked the sound of that and bid up Vornado's shares by 2% on Tuesday, to $43 a share. The stock has enjoyed a strong recovery since falling to as low as $13 a share two years ago.Roth is one of the few developers in the city who seems likely to build a new tower any time soon. He has teamed up with Rudin Management to develop a new building for investment firm Citadel at 350 Park Ave. He predicted high construction costs and elevated interest rates would prevent rivals from building new. Office rents would have to rise to about $200 per square foot to justify the cost of building, he said, which is about double the market rate for space in most Manhattan office towers.If Roth is right, it would be grim news for rivals including BXP, which hopes to develop a new tower at 343 Madison Ave., and RXR Realty, which wants to build a supertall at 175 Park Ave. When an analyst on Tuesday's call asked how many projects like that could break ground soon, Roth proclaimed: "None."