Vornado Realty Trust NYSE: VNO reported third-quarter comparable funds from operations of $0.65 per share, up 14% from $0.57 per share a year earlier, as rent commencements at PENN 1 and PENN 2, the Park Avenue Plaza acquisition and higher signage income more than offset higher interest expense.
Chairman and Chief Executive Officer Steven Roth said the company benefited from a strengthening New York office market, citing accelerating demand for higher-quality space, limited availability of large blocks and rising rents. Roth said Manhattan office leasing volume was on pace to reach its highest annual level since 2000, while vacancy in the Class A and better segment where Vornado competes had fallen to the mid-single digits.
“We are most definitely in a landlord’s market,” Roth said, adding that tenants and brokers were responding to the shortage of premium space. He said rents of $200 and $300 per square foot had become increasingly common in market discussions.
Leasing, occupancy and same-store growth
During the first nine months of 2026, Vornado leased 1.6 million square feet companywide, including 1.15 million square feet of Manhattan office space at average starting rents of $113 per square foot. The Manhattan leases generated mark-to-market increases of 23.5% on a GAAP basis and 16.8% on a cash basis, according to the company.
In the third quarter, Vornado completed 30 Manhattan office leases totaling 489,000 square feet. Those deals carried average starting rents of $123 per square foot, average terms of 9.5 years and mark-to-market increases of 37.2% GAAP and 25.9% cash.
- New York office same-store net operating income rose 11.9% on a GAAP basis and 8.7% on a cash basis.
- New York street retail same-store NOI increased 8.4% GAAP and 9.3% cash.
- New York office occupancy rose 80 basis points during the quarter to 93%, compared with 88.4% a year earlier.
- Signed leases not yet reflected in GAAP results represent $204 million of revenue expected to come online over roughly the next five quarters.
President and Chief Financial Officer Michael Franco said Vornado expects full-year 2026 comparable FFO to exceed 2025 levels. While the company was still finalizing its 2027 budget, Franco said the third-quarter FFO level should be a reasonable net run rate through 2027, factoring in higher interest rates, normal lease expirations and income being taken offline for retail redevelopment. He said the company expects significant additional growth in 2028 and beyond.
Vornado projects approximately 2.4 million square feet of New York office leasing in 2026, following 3.7 million square feet leased in 2025. The outlook includes the 1.05 million-square-foot Citadel lease at 350 Park Avenue, which Vornado expects to recognize in the fourth quarter.
PENN District transformation drives leasing
Roth said the first phase of Vornado’s PENN District redevelopment is complete, encompassing Moynihan Train Hall, Meta’s 730,000-square-foot Moynihan office complex, an expanded Long Island Rail Road concourse, food and beverage offerings, the 33rd Street pedestrian plaza and upgrades to PENN 1 and PENN 2. The company spent $2.5 billion on the work, which Roth said was on budget.
PENN 1 is now 96% leased. Since redevelopment began, Vornado has leased 1.8 million square feet at average starting rents of $98 per square foot. During the third quarter, it executed 10 deals totaling 248,000 square feet at average starting rents of $123 per square foot and average mark-to-market increases of 40%.
PENN 2 is 92% occupied after Vornado leased more than 1.6 million square feet since the project began. Available space totals about 150,000 square feet, and Roth said recent rents have ranged from $125 to $135 per square foot.
The company also plans to begin construction early next year on the redevelopment of retail along Seventh Avenue and 34th Street, as well as a 480-unit rental residential building at 34th Street and Eighth Avenue. Franco said the residential project is expected to begin delivering units in late 2028 or early 2029.
350 Park and other growth projects
After the quarter ended, Vornado closed its 350 Park Avenue joint venture with Ken Griffin as a 60% financial partner, while Vornado holds a 36% interest and the Rudin family holds 4%. The venture also closed a $3.3 billion construction loan and a 1.05 million-square-foot lease with Citadel.
The 1.9 million-square-foot tower is expected to include 520,000 square feet of available office space after Citadel’s commitment, with Citadel holding an option to expand by up to 330,000 square feet. Franco said the project is expected to generate a 9.2% return on cost to Vornado, while Roth said the unlevered return on cost exceeds 9% and the levered return is above 13%.
Management said the project had an anchor tenant in place and that approximately 60% of construction costs were committed, with another 20% “soft circled.” Vornado also signed its first lease at 623 Fifth Avenue, a 31,000-square-foot deal with a financial services firm at a starting rent close to $200 per square foot. Delivery of that redevelopment is scheduled for the fourth quarter of 2027.
Capital, retail and balance sheet
Vornado said retail demand remained healthy at prime locations, with rents nearing or reaching prior peaks. The company signed a 10-year Times Square renewal with Sephora and said its retail leasing pipeline for Fifth Avenue and the PENN District remained strong. Management estimated that stabilizing vacant retail space could add roughly $50 million of income.
The company also highlighted its signage and cleaning and security operations, which together generate $120 million of income. Roth said the signage business has grown at a 16% compound annual rate over the past five years and that Vornado does not currently intend to monetize either business.
Vornado ended the quarter with $1.9 billion of liquidity, consisting of $724 million of cash and restricted cash and $1.2 billion of undrawn credit lines. Franco said the company completed more than $4 billion of refinancings earlier in the year. Roth also said two potential asset sales were well advanced and could generate more than $1 billion of “new free cash” if completed, though he cautioned there was no assurance of closing.
About Vornado Realty Trust (NYSE:VNO)
Vornado Realty Trust is a publicly traded real estate investment trust that owns, manages and develops commercial properties, with a primary focus on premier office and retail assets in New York City. The company's portfolio includes office buildings, retail properties and mixed-use developments located in high-profile business and shopping districts.
Vornado is particularly active in Manhattan, where it has pursued large-scale development and redevelopment initiatives in the Penn District surrounding Pennsylvania Station.
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