Developer That Bought Times Building Puts Up For-Sale Sign, Hoping to Triple Its Money

What a difference 885 days make.

This week, Tishman Speyer Properties put the historic headquarters of The New York Times Company on West 43rd Street on the block for $500 million — nearly three times the amount Tishman Speyer paid for it, $175 million, in November 2004.

“It’s indicative of how fast rents have moved up and how much capital is chasing deals,” said Dan Fasulo, managing director of Real Capital Analytics, which tracks real estate deals. “There’s just so much money in the market. I don’t see it stopping in the short term.”

The average rent for first-class office space in Midtown has climbed to a record high of $70.77 per square foot, according to a report released on Tuesday by Cushman & Wakefield, a real estate broker. In addition to American investors and pension funds, foreign investors have also found New York attractive, because it is less expensive than cities like London, Paris and Hong Kong. At the same time, interest rates are still relatively low and the dollar is weak against the euro.

“People from Europe come here and think they’re getting a bargain,” Mr. Fasulo said.

It seems as if every week brings news of another record-breaking deal for office towers or residential buildings in a city grappling with prosperity and success. Some analysts wonder what will happen when the real estate boom runs out of air. In the meantime, there is growing concern that rising office rents could drive some companies out of New York, while housing costs are making New York less hospitable for poor, working-class and even middle-class families.

One 25-room mansion on the Upper East Side has $59 million price tag, while the average apartment in Manhattan sells for $1.2 million. Harry B. Macklowe, the developer, recently bought eight first-class office buildings in Midtown for a total of $7.2 billion, or more than $1,100 a square foot.

In December, a New Jersey real estate family, the Kushners, announced that it was buying the 41-story skyscraper at 666 Fifth Avenue for $1.8 billion, or $1,200 per square foot, from Tishman Speyer.

At $500 million, the company or investor that buys The New York Times headquarters would be paying $666.66 a square foot, seemingly a bargain by comparison. But the 750,000-square-foot, 15-story building, which opened in 1913, is no one’s idea of a first-class office tower. It needs an expensive overhaul before it can be rented to corporate tenants.

But there are not that many alternatives in Midtown.

“It’s the only office building north of 42nd Street that can deliver in the next 24 months more than 300,000 square feet of contiguous space” that would rent for less than $100 per square foot, said Darcy A. Stacom, the broker at CB Richard Ellis who sold the property for The Times in 2004 and is now handling it for Tishman Speyer.

The Times Company plans to move this year into its new headquarters, a skyscraper between 40th and 41st Streets, across Eighth Avenue from the Port Authority Bus Terminal.

At the time the deal was struck, some real estate executives suggested that Tishman Speyer had overpaid for the Times building. But rents have marched steadily upward since then, while vacancy rates plummeted. So far this year, Manhattan office buildings are selling for an average of $834 a square foot, up from $300 in 2004, according to Real Capital Analytics.

“The value of the building has increased significantly since we bought it,” said Rob Speyer, senior managing director of Tishman Speyer. “It’s in the best interest of our investors to realize that value.”

Right now, financial institutions — everything from investment banks to hedge funds and private equity companies — are driving the market. They collectively accounted for more than a third of the space leased in Manhattan so far this year. Those companies are also paying the highest rents, with financial companies signing more than 12 of the 18 leases this year for space costing $100 or more per square foot, according to Cushman & Wakefield.

But skyrocketing rents are one reason that JPMorgan Chase & Company is looking at moving thousands of employees from Midtown to Lower Manhattan, where rents are one-third less. It is also why Citigroup announced last year that it was moving 1,200 executives to Jersey City from downtown. Two years earlier, Citigroup moved 1,900 employees out of Lower Manhattan, most of them to a corporate campus in Warren, N.J.

“The flip side of all this prosperity,” said Kathryn S. Wylde, president of the Partnership for New York City, “is that lower- and middle-income workers are being priced out of the housing market and the technical and operational jobs at our major industries can no longer afford the rents.”