Snap Signs 199K SF Sublease at Vornado's Penn 2 as Manhattan Office Market Tightens

Snap's Penn 2 Sublease and a Busy Week for New York Real Estate

Snap Inc., the parent company of Snapchat, has signed a 199,000-square-foot sublease at Vornado Realty Trust's Penn 2 tower in Manhattan, according to Colliers' July New York City office report. The Santa Monica, California-based social media firm is taking over three floors currently occupied by Verizon inside the 31-story, 1.6 million-square-foot building, with the deal running through 2044. Financial terms were not disclosed; Crain's New York Business reported last year that average rents in the tower started at $109 per square foot, and Commercial Observer reported that Snap is paying a premium above Verizon's rent.

Snap joins a tenant roster at Penn 2 that includes Madison Square Garden Entertainment, Universal Music Group and Major League Soccer. The sublease is part of a broader push by technology firms to expand their Manhattan footprint: year-to-date leasing volume across the borough stands at nearly 26.7 million square feet, up 22.1% from last month, a total boosted by Anthropic's 466,000-square-foot deal.

The wider market is tightening. Average asking rents in Manhattan reached $78 per square foot in June, their highest level since July 2020, according to Colliers. Total office availability fell to 66.2 million square feet, the lowest since September 2020, while sublease availability dropped 26.4% over the past year to 10.1 million square feet — its lowest point since August 2019.

The week's other major moves include the New York City Taxi and Limousine Commission's 39,000-square-foot headquarters lease at AmTrustRE's 250 Broadway, with the agency relocating from 33 Beaver St. in the first quarter; women's apparel retailer Veronica Beard renewing and expanding its headquarters at The Winter Organization's 26 W. 17th St. to 60,000 square feet; Aon renewing its 202,000-square-foot lease at 1 Liberty Plaza with landlord BGRE; and AI firm Sapien AI taking 11,000 square feet at 48 W. 25th St.

Why the Manhattan Office Numbers Are Moving in the Landlord's Favor

What Snap's Sublease Tells Us About Trophy Towers

Snap's decision to commit through 2044 at a premium building is significant on two counts. First, it is absorbing sublease space — Verizon's floors — at a time when sublease supply is shrinking (down 26.4% year over year). Removing large blocks of sublease inventory reduces the discount competition landlords face and is widely read as a bullish signal for direct leasing. Second, paying above Verizon's rent suggests the pricing ceiling on top-tier Midtown towers is moving higher. At a building where average rents start at $109 per square foot, a tenant willing to sign a roughly 18-year term is making a long-term bet that premium location and amenities matter more than remote-work cost savings.

The Market Data Behind the Landlord's Market

The Colliers numbers describe the tightest Manhattan office market in years: asking rents at a six-year high of $78 per square foot, availability at its lowest since September 2020, and sublease supply at an August 2019 low. The 466,000-square-foot Anthropic lease shows AI companies emerging as the demand engine that law firms and financial services provided in earlier cycles. But the gap between the borough-wide average and Penn 2's $109-plus rents also points to a barbell market: leasing momentum is concentrated in amenity-rich trophy towers, which is why the average is rising even as older, less efficient buildings struggle to attract tenants.

Hotels and Capital Markets Tell a Different Story

Not every asset class is strengthening. Korman Communities paid a gross value of $220 million to buy out partners CalSTRS and BlackRock at three AKA-branded Manhattan hotels — below the $256 million the group paid in 2006 — with hotel values broadly declining on higher labor, maintenance, insurance and debt costs. Elsewhere, investment sales and lending were active: the $238.2 million purchase of 1441 Broadway with a Fortress Investment Group loan, Pershing Square Foundation's $188 million acquisition of a life-sciences site at 125 West End Ave. for a brain research center, and a $250 million New York Life loan for a 560-unit Astoria tower. The pattern is clear — office and multifamily development remain financeable, while hospitality is being repriced downward.

What Tenants, Landlords and Investors Should Do With This Data

Tenants: move early. Availability is at 66.2 million square feet, the lowest since September 2020, and June asking rents of $78 per square foot are the highest in six years. The sublease market, previously a source of discounted space, has shrunk 26.4% year over year to 10.1 million square feet. Firms with lease expirations in the next two years should begin site searches now rather than waiting for conditions to ease.

Landlords: trophy assets are doing the work. Snap's sublease at a reported premium to Verizon's rent, with a term through 2044, shows that top-tier towers with strong amenity packages can still command $109-plus per square foot. Lease-up is concentrated in this segment, so repositioning capital is best spent on buildings that can compete for tech and media occupiers.

Investors: underwrite hospitality carefully. Korman's $220 million buyout valued three AKA hotels below the $256 million paid two decades ago, as labor, maintenance, insurance and debt costs pressured hotel values. By contrast, office and multifamily debt is flowing — Barings' $130 million refinancing in Long Island City, AllianceBernstein's $137.5 million in Bedford-Stuyvesant and New York Life's $250 million Astoria construction loan all closed within the same week.