Sony in talks to anchor Tishman Speyer's 99 Hudson Boulevard tower

Sony is in negotiations to anchor 99 Hudson Boulevard, the 48-story Tishman Speyer office tower proposed on Manhattan's far West Side, and may already hold a term sheet, Commercial Observer reported on Oct. 2; the report does not put a square footage on the discussions, though it names Savills' Erik Schmall and Allyson Bowen as Sony's brokers, neither of whom responded to requests for comment.

The tower itself would rise 48 stories with roughly 1.256 million square feet on 11th Avenue between West 36th and West 37th streets, opposite the Javits Center, its unobstructed Hudson River views and main lobby facing the new Bella Abzug Park. Public documents cited by Commercial Observer put construction starting Dec. 1; the all-electric LEED Gold building would not be ready for occupancy until around 2030, with Henning Larsen's renderings having been revealed back in 2019.

Sony's current U.S. headquarters occupies the top 568,000 square feet of 11 Madison Avenue, a 30-story Art Deco tower owned by SL Green Realty, and that building has no space left to give it. Designed in 1928 by Harvey Wiley Corbett and Dan Everett Wade to reach 100 stories before the Depression stopped its ascent, it was not finished until 1950; Sony signed its lease there in 2013, a year after selling its own 550 Madison Avenue headquarters to Joseph Chetrit for $1.12 billion. Chetrit flipped 550 Madison three years later for $1.4 billion to Olayan America, which redeveloped it behind the Chippendale-style top designed by Philip Johnson and John Burgee.

The trade the coverage sketches is location against room to grow: Madison Square Park and NoMad on one side, an address across from the Javits Center on the other, and 568,000 square feet of existing space on the first that cannot be made any bigger. Sony has done this before, having owned a tower, sold it, and taken space in someone else's, and now it sits among the corporate occupiers Commercial Observer describes as hunting for newer, bigger and more collaborative workplaces.

The current footprint shows why: a 36-seat screening room, a 110-person multipurpose room and a 74-person multipurpose room with a performance venue are the kind of program a 1950-vintage building has to be retrofitted around, whereas a new one can be drawn for them from the first sketch. The report calls it highly likely that the 99 Hudson Boulevard plans will change to add space for Sony's needs and for occupier preferences that have shifted since the pandemic.

The project's arithmetic also runs through the city. Tishman Speyer has asked the Industrial Development Agency for $92 million in property tax exemptions and mortgage tax recording exemptions, and would instead make payments in lieu of taxes, the PILOT structure used across the Hudson Yards district, a request the report calls the developer's current hiccup. A subsidy, a start date and a lease are three separate decisions, and only the construction calendar comes with a date on it.

Tishman Speyer's September ran on both sides of that split. The firm closed a $340 million apartment acquisition in Anaheim through TS Plus, its value-add arm, on Sept. 1, the top-of-market buy in which TS Plus paid $904,000 a key for a 95%-leased, 2020-vintage asset and then budgeted amenity work on top of the purchase price. The two positions are the same underwriting on different clocks: amenity-led rent, one in a stabilized building bought at a price the market had already set, the other in a building that does not exist yet.

Whether Tishman Speyer is early or late on the Manhattan half, the build-over-buy trade keeps answering in the affirmative. The construction freeze made development the new acquisition, with managers buying land and lending into starts because standing product already prices in the scarcity. 99 Hudson Boulevard is that position in its clearest form: 1.256 million square feet, an anchor still in talks, and a delivery date four years out. Sony, if it signs, would be committing to space long before the doors open, a longer-dated proposition than taking floors in a building it can already walk through.

The leasing market this tower would enter is clearer on who is signing than on what they pay. Our September report on Fifth Third's expansion at Rockefeller Center made the point with a lease that runs to 2034: the tenant was identifiable, its footprint grew, and the rent was not disclosed. The same asymmetry applies here, one step earlier in the process, since a negotiation at 99 Hudson Boulevard would attach a name to the demand for new construction without attaching a number to its price.

Construction is set for Dec. 1 and occupancy around 2030, which leaves Tishman Speyer needing to fill the rest of a 1.256-million-square-foot rent roll that currently has one prospective tenant. How much of the tower Sony takes, and at what rent, is the detail the coverage does not provide—and the one that will decide whether this bet pays off.