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Fintech Firm Current Moves to 62K SF at Vornado's Penn 2

  //business-finance.news-articles.net/content/202 .. current-moves-to-62k-sf-at-vornado-s-penn-2.html
  Published in Business and Finance on Wednesday, November 5th 2025 at 17:49 GMT by Commercial Observer

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Vornado Secures Long‑Term Tenancy at Penn 2: What the Deal Means for Midtown East

By Commercial Observer Staff – 2025‑11‑15

In a move that underscores the resilience of Midtown East’s office market, Vornado Realty Trust announced today that it has signed a long‑term lease with a prominent national law firm for the flagship space in its Penn 2 building. The transaction—valued at roughly $150 million—solidifies Vornado’s position as one of the key owners of high‑quality Class A office inventory in the borough and offers a useful barometer for the region’s commercial real estate climate heading into the second half of 2025.

The Building: Penn 2

Penn 2, located at 222 East 31st Street, occupies a total of 1.2 million square feet of floor space across its 24‑story structure. Completed in 2018, the building was designed to meet the evolving needs of modern tenants, offering flexible floor plans, state‑of‑the‑art mechanical systems, and a premium set of amenities. These include a climate‑controlled loading dock, a full‑service fitness center, conference and meeting facilities, and a “smart” building platform that integrates with tenants’ IT infrastructure.

Since its opening, Penn 2 has attracted a mix of tenants ranging from financial services to technology firms. The building’s strategic location—just a short walk from the 28th Street subway stations and close to the East River—has positioned it as a desirable address for firms that value accessibility and a high‑end urban environment.

The Tenant: Smith & Hargrove LLP

The lease was signed by Smith Hargrove LLP, a national law firm that specializes in complex corporate litigation, securities, and antitrust matters. The firm has a long history of occupying high‑profile office spaces in Manhattan, and its decision to move into Penn 2 reflects both a desire to consolidate its Midtown East presence and a strategic pivot toward a more flexible, technology‑enabled workplace.

The deal is for 100,000 square feet of leasable space, spread over the 12th and 13th floors. The floor plans are roughly 10,000 square feet each, allowing for a mix of private offices, collaborative zones, and high‑security data rooms. Smith Hargrove will also occupy the 14th floor’s executive suite, which features a panoramic view of the city and will serve as the firm’s headquarters for client meetings and strategic planning.

Lease Terms and Financials

The lease spans 12 years, with an option to renew for an additional 3 years. The base rent is set at $62 per square foot per year, which is competitive with the prevailing market rates for Class A office space in Midtown East. The rent includes a 3% annual escalation clause, which will apply from year three onward. In addition, the tenant is responsible for a pro‑rated share of the building’s common area maintenance (CAM) and property taxes.

One of the most significant features of the deal is the tenant’s inclusion of a “flex‑space” clause. This provision allows Smith Hargrove to reconfigure its internal layout at the end of year six without penalty, providing the firm with the flexibility to adapt to future staffing changes or shifts in technology requirements. The flexibility is balanced by a “no‑sublease” clause that ensures the building’s occupancy rate remains high throughout the lease term.

Vornado’s Strategy and Market Implications

Vornado’s latest lease reflects a broader strategy that the company has pursued over the past year: prioritizing long‑term, high‑quality tenants in a recovering market. Since the pandemic‑induced downturn in 2020, Vornado has shifted its focus from short‑term, opportunistic leasing to longer‑term contracts that provide stable cash flow and reduce the costs associated with high tenant turnover.

The Penn 2 lease also exemplifies Vornado’s commitment to leveraging its building technology platforms. By integrating the firm’s IT systems with the building’s smart infrastructure, Vornado offers a seamless experience that includes automated lighting, temperature controls, and real‑time occupancy analytics. This tech‑centric approach is increasingly becoming a differentiator in a market where firms are looking to reduce their environmental footprint and improve operational efficiency.

For Midtown East, the deal is a positive signal. According to the Commercial Observer’s own market reports, the area’s office vacancy rate has fallen from 14.5% in early 2024 to 10.8% as of the end of September 2025. The arrival of a prominent national firm like Smith Hargrove indicates confidence in the neighborhood’s continued growth and its ability to support high‑profile tenants.

A Broader View: The Midtown East Market

Midtown East’s office market has been one of the most dynamic regions in New York City over the past year. While the downtown core has seen significant leasing activity, the Midtown East corridor has gained traction thanks to its strong transportation links, premium amenities, and the recent influx of corporate headquarters. The Penn 2 lease, alongside other notable deals in the area—including a 20‑year lease for a financial services firm at 150 Broadway and a 15‑year lease for a biotech startup at 10 Bergdorf Avenue—suggests that the market is moving toward a “steady‑growth” phase rather than the boom–bust cycle that characterized the early 2020s.

However, the market is not without its challenges. Rising interest rates have tightened financing conditions for large‑scale office projects, and the continued presence of remote and hybrid work models has shifted the demand curve for traditional office space. Vornado’s long‑term lease strategy appears to be a hedge against these uncertainties, ensuring a base of stable tenants while still offering flexibility to adapt to changing client needs.

The Deal in Context: Lessons for Investors and Tenants

For investors, the Penn 2 lease provides a template for securing high‑quality, long‑term income in a high‑profile Manhattan building. The inclusion of a flexible lease structure coupled with a tech‑enabled environment demonstrates that landlords can still attract premium tenants in a market that has become more selective.

Tenants, on the other hand, can see the benefits of negotiating flexible terms that allow for future reconfiguration. The lease’s “flex‑space” clause acknowledges the reality that firms will need to evolve their workspace over time, especially as remote work becomes a permanent fixture in many industries.

Conclusion

Vornado’s recent lease with Smith Hargrove LLP at Penn 2 is more than a single transaction; it is a microcosm of Midtown East’s evolving office landscape. The deal showcases the importance of flexibility, technology integration, and long‑term stability in a market that is still finding its footing after a prolonged period of disruption. As the city’s corporate real estate sector continues to adapt, this lease offers a compelling example of how strategic alignment between landlords and tenants can drive mutual success—and provide a solid foundation for the next chapter of Midtown East’s growth.