Long-standing commercial law firm Weil, Gotshal & Manges has announced its planned dissolution. Founded in 1931, the practice currently occupies around 447,000 square feet of office space across eleven floors in the prestigious General Motors Building at 767 Fifth Avenue. The property is 60 percent owned by BXP, which acquired the 50-storey tower in 2008 as part of a joint venture with Goldman Sachs and Meraas Capital. The existing lease regularly runs until 2034.
Weil Gotshal has been a tenant at the location since the building opened in 1968 and last extended its contract in 2014. With around 2,000 employees worldwide, including approximately 1,200 lawyers, and most recently generating nearly $2.1 billion in revenue, the practice ranked among the 30 largest law firms in the US. The firm became particularly well known for high-profile restructuring and insolvency mandates such as Enron, Drexel Burnham Lambert, General Motors and Lehman Brothers. Following failed merger talks with Willkie Farr & Gallagher and the departure of notable partners, a phased winding-down is now taking place without a formal insolvency filing.
Tight supply in the prime office space segment
Despite economic uncertainties, the market for Class A office space in Manhattan continues to record strong momentum. According to surveys by property services provider Savills, leasing take-up across the borough reached 33.5 million square feet by the end of the third quarter, representing a 5.6 percent increase compared to the same period of the previous year. Legal services providers proved to be a key driver of demand.
- —Simpson Thacher & Bartlett secured 916,000 square feet in Extell Development's 570 Fifth Avenue project.
- —Proskauer Rose expanded its space at 11 Times Square to 478,000 square feet.
- —Kirkland & Ellis increased its presence at 900 Third Avenue to 257,135 square feet.
- —Morgan Lewis leased 205,000 square feet at 1251 Avenue of the Americas, while Loeb & Loeb expanded to 178,959 square feet at 345 Park Avenue.
At the same time, available supply is tightening noticeably. According to a report by Colliers, office availability in Manhattan fell to 12.4 percent in the third quarter, marking the tenth consecutive quarterly decline and the lowest level since August 2020. The volume of space offered for sublease fell to 10.07 million square feet in August, a decrease of 22.3 percent within a year.
Substantial rental growth potential for BXP
Market experts expect that the vacated space in the General Motors Building will quickly find new occupiers. Matthew Schreck, research director for the New York metropolitan region at Savills, stated that demand for prime, prestigious space remains unabated. He noted that interested parties and their advisors are likely to approach the owner directly, even before the space is formally brought to market. According to Savills, average asking rents for Class A properties in Manhattan rose by 9.9 percent year on year.
For landlord BXP, the departure of the anchor tenant creates financial opportunities. Douglas Linde, President of BXP, stated shortly before the firm's partners reached their decision that existing rents in the General Motors Building averaged below $150 per square foot. At its new development project 343 Madison Avenue, the company is already achieving rents ranging from $190 to more than $300 per square foot. Given that vacancy rates for top-tier properties in Midtown Manhattan stand below 2 percent, market observers expect reletting rents for the space to reach between the high $100s and around $200 per square foot.
