SL Green Realty (NYSE:SLG) said its third-quarter performance reflected continued strength in Manhattan’s office leasing market, as the company surpassed 2 million square feet of leasing year to date and lifted leased occupancy to 95%.
Chairman and Chief Executive Officer Marc Holliday said demand for high-quality, well-located Manhattan office space has supported rising rents and improved pricing power. The company said rents on signed leases are generally exceeding prior rents by about 15%, while same-store net operating income growth has exceeded 4%.
“Our greatest strength comes from having a well-leased portfolio at rents that are generally exceeding previous rents,” Holliday said. He added that SL Green’s leasing pipeline increased during the quarter to 1.3 million square feet, consisting of both renewals and efforts to fill remaining vacant space.
Leasing Pipeline and Manhattan Market Conditions
Steven Durels, executive vice president and director of leasing and real property, said more than 840,000 square feet of the 1.3 million-square-foot leasing pipeline involves active lease negotiations rather than preliminary term sheets. He said the mark-to-market opportunity in the pipeline is “north of 20%.”
About 1 million square feet of the pipeline involves renewals, while roughly 300,000 square feet represents new leasing. Durels said larger tenants have increasingly begun renewal discussions three to five years before lease expirations, reflecting concerns about the limited future supply of premium office space.
The company said tenant-improvement allowances have remained elevated, but free-rent concessions have started to decline. Durels noted that renewals generally carry much lower concessions than new leases, supporting stronger net effective rents.
Holliday said he expects rental growth to remain durable through 2027 and 2028 as new office deliveries remain limited. He said prime Midtown office assets could continue to trade at capitalization rates of approximately 5% to 5.5%, with 6% representing the higher end for prime properties, despite elevated interest rates.
SL Green also expects leasing momentum across properties east of Grand Central Terminal. Durels cited increasing rents and tenant activity at 800 Third Avenue and 420 Lexington Avenue, as well as high rents at the Graybar Building.
Financing and Disposition Activity
During the quarter, SL Green completed a $2 billion refinancing of 245 Park Avenue. Holliday said the transaction brought the company’s 2026 financing activity to more than $7 billion, extending debt maturities at fixed rates and generating additional liquidity.
Management said the company now has relatively limited financing needs in 2027 and can focus more heavily on growth initiatives, development, asset sales and joint-venture transactions.
The company also announced sales of 110 Greene Street and 185 Broadway. Harrison Sitomer, president and chief investment officer, said the two side-street properties sold at capitalization rates of about 5.70%.
SL Green has announced six of an expected 11 disposition-related transactions for the year, according to Sitomer. Two remaining joint-venture stake transactions are in documentation, with one nearing completion and another targeted for completion by year-end, though it could move into early 2027. Two additional transactions recently entered the market.
Management reiterated its goal of achieving $2.5 billion of dispositions and joint-venture activity, although some transactions could be deferred into the first half of 2027. Holliday emphasized that the company had completed approximately $1 billion of dispositions alongside its financing work during the first nine and a half months of the year.
Interest Rates Affect Guidance
Chief Financial Officer Matt DiLiberto said higher interest rates and the timing of asset sales contributed to a $0.25 reduction in the company’s guidance for the second half of the year. Approximately $0.05 of that amount relates to fee income, with the remainder tied to interest expense.
DiLiberto said interest-rate curves were generally more than 100 basis points higher than projected last December. Holliday said higher rates had a $0.25 impact on the back half of the year, though the company has used hedging strategies to limit the effect.
Management maintained its objective of achieving cash same-store NOI growth above 10% in 2027, despite stronger 2026 performance creating a more difficult comparison and continued inflationary pressure on operating costs.
Development, Hospitality and Fee Businesses
SL Green said demolition is underway at 346 Madison Avenue, where it expects to submit the project to the city’s ULURP land-use review process in December. The company said it has received a request for proposal from one prospective tenant and expects another, while construction completion is not expected until the fourth quarter of 2031.
At 750 Third Avenue, SL Green is converting an office building into approximately 750 multifamily units. Holliday said interior demolition and column strengthening have been substantially completed, and the company expects to close on roughly $500 million of construction financing by year-end. The project is expected to be delivered in 2029.
The company also sold a 20% stake in its hospitality and food-and-beverage platform at a $200 million valuation, generating $40 million of proceeds. Holliday said the business includes events, food-and-beverage operations and amenity-space programming across the portfolio, but excludes Summit One Vanderbilt and physical real estate. The platform generated about $2 million of annual FFO, according to management.
Summit One Vanderbilt marked its fifth anniversary and welcomed its 10 millionth visitor. However, management said its full-year outlook for the attraction declined as attendance fell short of initial expectations. DiLiberto said third-quarter expenses included annual percentage rent, while the company is also incurring costs related to a planned Paris location expected to open in June 2027.
SL Green said it has deployed $643 million of the $1.3 billion available through its opportunistic debt fund. Sitomer said the company is finding opportunities through loan acquisitions, new originations and extensions or upsizes of existing facilities.
About SL Green Realty (NYSE:SLG)
SL Green Realty Corp. (NYSE: SLG) is a self-managed real estate investment trust focused primarily on acquiring, owning, managing and redeveloping commercial properties in Manhattan. The company is one of New York City’s prominent office landlords, with a portfolio concentrated in high-quality office buildings and related retail assets.
Its activities include leasing office and retail space, property management, redevelopment and development projects, and providing amenities and services designed to support tenants.
