Vornado Realty Trust (NYSE:VNO) executives struck an upbeat tone on the company’s fourth-quarter 2025 earnings call, pointing to what Chairman and CEO Steven Roth described as a rapidly tightening Manhattan office market and a strong year of leasing activity led by THE PENN DISTRICT portfolio.
Management says Manhattan is nearing a “landlord’s market”
Roth said tenant demand from finance, tech and other industries remains “extremely robust” amid “declining availabilities in the better building subset,” and argued New York is on the “foothills of the best landlord’s market in 20 years.” He highlighted Vornado’s concentration in Manhattan office assets, along with high-street retail on Fifth Avenue and Times Square, a large-format signage business, and what he called a strong development pipeline.
Leasing volume and PENN DISTRICT progress
Roth said the company leased 4.6 million square feet of office space during 2025, including 3.7 million square feet in Manhattan. He characterized it as the firm’s highest Manhattan leasing volume in more than a decade and its second-highest year on record.
Excluding a 1.1 million-square-foot master lease with NYU, management said average starting rents in Manhattan were $98 per square foot, with mark-to-markets of +10.4% on a GAAP basis and +7.8% on a cash basis, and an average lease term of over 11 years. For the second straight year, Vornado said it led in leasing above $100 per square foot, with 46 leases totaling 2.5 million square feet, about two-thirds of its activity. In the fourth quarter, the company executed 25 New York office deals totaling 960,000 square feet at average starting rents of $95 per square foot.
At PENN 2, Vornado said it leased 908,000 square feet in 2025 at an average starting rent of $109 per square foot with an average term of more than 17 years. The company said it has leased more than 1.4 million square feet of PENN 2 since the project began and reached 80% occupancy, with 348,000 square feet of vacancy remaining. Management also said it increased its projected incremental cash yield for the project to 10.2%–11.6% based on executed leases and remaining-space activity.
At PENN 1, Vornado said it leased 420,000 square feet during 2025 at an average starting rent of $97 per square foot. Since the start of physical redevelopment at PENN 1, management said it has leased over 1.7 million square feet at average starting rents of $94 per square foot. PENN 1 has 177,000 square feet of vacancy remaining, plus 500,000 square feet of first-generation leases still to roll.
Elsewhere in THE PENN DISTRICT, the company said two notable PENN 11 transactions in the fourth quarter included a major tenant expanding by 95,000 square feet (bringing its footprint to 550,000 square feet) and AMC Networks renewing for 178,000 square feet.
Occupancy, the leased-vs-GAAP gap, and earnings outlook
Vornado said office occupancy rose to 91.2% in 2025 from 88.8% a year earlier. Roth spent part of his remarks addressing what he called “chatter” about leased occupancy versus GAAP occupancy. He said the gap at Vornado represents “over $200 million” of signed and committed revenue that will be recognized under GAAP over the next several years as tenants build out space or take occupancy.
Roth cautioned modelers not to assume “more than a $0.40 uptick” in the 2027 year, later clarifying in response to an analyst question that the figure referred to FFO. Management also said the New York office leasing pipeline remained robust, with nearly 1 million square feet of leases in negotiation or proposal stages.
President and CFO Michael Franco reported comparable FFO of $2.32 per share for full-year 2025 and $0.55 per share for the fourth quarter, compared with $0.61 per share in the prior-year quarter. Franco attributed the year-over-year quarterly decrease primarily to higher net interest expense and lease termination income at 330 West 34th Street in the prior year, partially offset by rent commencements, the NYU master lease at 770 Broadway, and higher signage NOI.
Franco said same-store GAAP NOI rose 5% in the quarter, while same-store cash NOI declined 8.3%, which management attributed to free rent tied to significant recent leasing and a cash rent adjustment related to the PENN 1 ground lease true-up. Franco said the company still expects cash NOI to “flip” in the second half of 2026 as free rent burns off and more tenants begin paying rent.
For 2026, Franco said comparable FFO is expected to be in line with 2025, reflecting anticipated non-core asset sales and taking income offline in connection with redevelopment plans at 350 Park Avenue and retail along 34th Street and Seventh Avenue. He said the first quarter would be more impacted by GAAP rent ramping through the year, higher interest expense from a recent bond issuance, and seasonality in the signage business. Management reiterated expectations for “significant earnings growth in 2027” as PENN 1 and PENN 2 lease-up contributions come online.
Development projects and capital allocation
Roth said construction is expected to commence in April on 350 Park Avenue, a 1.85 million-square-foot new build, with Citadel as anchor tenant and Ken Griffin as a 60% partner. In the Q&A, management said Griffin accelerated an option exercise and the venture agreement was amended to give Vornado and Rudin flexibility to invest within a range (management described it as 20% to 36%) rather than a fixed equity percentage.
Roth also detailed a September acquisition: 623 Fifth Avenue, a 383,000-square-foot property acquired for $218 million ($569 per foot). He said Vornado intends to reposition it as a high-end “boutique office” redevelopment and targeted delivery by the end of 2027. Roth noted Saks Fifth Avenue is in bankruptcy and said he believed “any outcome” would be good for Vornado, though he did not provide further specifics. He also discussed return math for the project and said it could translate to about $0.11 of incremental earnings, describing it as “just math” based on income expectations and cost assumptions discussed on the call.
In January, the company closed on the acquisition of 3 East 54th Street for $141 million and said it is considering options including hotel, office, and residential uses. Roth also said Vornado plans to develop a 475-unit rental residential building at 34th Street and Eighth Avenue, expecting to break ground in the fall. Additionally, he said the company will replace “junky” retail along 34th Street near THE PENN DISTRICT with more modern retail offerings.
On the balance sheet, Roth said liquidity totaled $2.39 billion, including $978 million of cash and $1.41 billion of undrawn credit lines. Franco said the company refinanced and extended maturities on nearly $3.5 billion of debt and completed a $500 million seven-year unsecured bond offering at 5.75% that was “significantly oversubscribed.” Franco said net debt-to-EBITDA improved to 7.7x from 8.6x at the start of the year. He also said S&P revised Vornado’s credit outlook to stable from negative and affirmed its BBB- unsecured rating.
Roth said the company began buying back stock more actively, repurchasing 2.352 million shares for $80 million at an average price of about $34 in recent months. Since a 2023 authorization, he said the company has repurchased 4.376 million shares for $109 million at an average of roughly $25 per share. In response to a question about using dispositions to fund repurchases, Roth said the company had “a few assets for sale” and answered “double yes” on potentially leaning further into buybacks if the valuation disconnect persists.
On the dividend, Roth said management and the board have an incentive to return to a “normalized dividend,” but added it would “not be this year,” and tied the timing to getting beyond free rent periods and tenant improvement spending as leases convert into normalized income streams.
About Vornado Realty Trust (NYSE:VNO)
Vornado Realty Trust is a self‐administered real estate investment trust focused on the ownership, management and redevelopment of office and retail properties. As a fully integrated REIT, the company oversees leasing, property management, building operations and strategic capital improvements designed to enhance asset value and tenant experience. Vornado’s business model emphasizes long‐term cash flow generation through stable rental income and disciplined portfolio optimization.
The company’s core portfolio is concentrated in New York City, where it holds a diverse mix of office towers and street‐level retail assets in prominent submarkets such as Midtown and the Penn Plaza corridor.
