Case Study
KPMG: Accounting for Good Taste
KPMG partnered with CBRE in a transformative post-COVID occupancy and workplace phase 1 analysis that resulted in a 40% reduction in their space envelope and a relocation to Manhattan’s newest development at 2 Manhattan West, the largest new development transaction since the onset of the pandemic, and set precedent within their industry for next generation occupancy strategy.
August 1, 2022
Overview
With 795,000 RSF across three Midtown locations with varied lease expirations, KPMG sought to consolidate and substantially reduce their space envelope.
KPMG partnered with CBRE in a specialized “think tank” with leaders from across CBRE's service lines to analyze the post-COVID office landscape and create a space envelope for KPMG best suited to adapt to the changing workplace in alignment with KPMG’s future strategic objectives, even if it meant potentially leaving 345 Park Avenue where they had resided since the building’s inception in 1968.
The Solution & Result
- Working with CBRE to evaluate various floor plans and building types, KPMG gravitated towards a modern building (new construction or substantially renovated) which more closely aligned with the firm’s ESG and long term occupancy goals. Nonetheless, remaining at 345 Park Avenue was also an attractive and “comfortable” alternative that would need to be thoroughly explored (though it quickly became apparent that modernizing 345 would be disruptive and costly).
- There was substantial competition for new construction offerings (Brookfield’s 2 Manhattan West in particular), but CBRE quickly positioned KPMG as the most attractive active tenant in the market by leveraging KPMG’s premier brand quality and CBRE’s market credibility to seamlessly implement and outmaneuver the competition.
- CBRE worked with KPMG to achieve consensus. We developed presentations and case studies, helping to drive decision making amongst numerous senior leaders, including 330 partners, over 150 managing directors and additional C-level executives. Given the rapidly changing social and macroeconomic landscape, developing deliverables that helped stakeholders make confident decisions was no easy feat, but our success enabled CBRE to outpace the competition and ultimately drive a below-market, qualitatively superior transaction for KPMG.
- CBRE’s aggressive negotiations in the market, while respecting the 50+ year relationship between KPMG and their existing landlord, resulted in KPMG's landlord at 345 Park Avenue offering KPMG a uniquely competitive and attractive solution to stay-in-place.
- Ultimately, CBRE negotiated terms at the state-of-the-art 2 Manhattan West that provided the most compelling option to entice KPMG’s workforce to return to the office, and resulted in a significant reduction in KPMG’s annual run rate. The economics negotiated by CBRE at a brand-new building were better than those that would have been achieved in a renewal at 345 Park or in a relocation to many older, existing buildings.
- Highlights include:
- No rent payments until 2026 (despite delivery of new space as early as mid-2024)
- Real estate tax protection at the expiration of the PILOT program
- Prominent lobby signage, robust competitor restrictions, as well as significant near-term and future flexibility that allows KPMG to adjust its leased envelope (up and down) to adapt to changes in an evolving post-COVID, hybrid Return-to-Office environment