UN set to lease Albano Building.

The United Nations has agreed to lease the Albano Building on East 46th Street as substitute office space for the roughly 700 United Nations employees that will soon be dislocated from its signature headquarters tower, the Secretariat Building. A hallmark of the city's East Side skyline since it was built in the early 1950s, the Secretariat is scheduled to undergo an extensive renovation beginning in early 2009.

According to Werner Schmidt, a spokesman for the UN Capital Master Plan, the office within the United Nations that is overseeing the renovation project and which leased the swing space in the Albano Building, staff will begin relocating to the new space next year in order to free up the ten uppermost floors of the Secretariat Building. From there, a top to bottom renovation of the 39-story tower will commence 10 floors at a time in order to upgrade its antiquated offices and install better security and safety measures.

UN personnel that move to the Albano Building will remain there for the duration of the Secretariat Building's renovation, which UN officials have said will be finished by 2015, although the details of the project's construction timetable remain hazy. The majority of the Secretariat Building's occupants will remain behind and will be shuffled within the building to make way for the work.

According to Schmidt, those who go to the Albano Building are the "lucky ones, because they only have to move once," although he said that it hasn't been determined yet which offices specifically would relocate to the new site.

The renovation plan was one of several options, varying in scope and cost, that the United Nations has considered in recent years to revamp its ageing facilities. Although most city and state officials agree that the UN campus is in desperate need of renovation, the project has seemed to be hung up in planning for years. There have also been particular concerns among United States government officials that a renovation would be exorbitantly expensive.

A Senate subcommittee investigating the matter in 2005 heard testimony from Donald Trump, who had for a time served as an advisor to the UN renovation project. Trump gave a scathing report, explaining that the renovation's estimated cost of $1.2 billion at that time would likely swell far over budget, to as much as $3 billion or higher from both mismanagement and quickly rising construction costs.

Late last year, the United Nations General Assembly, the international organization's main deliberative body, wound up adopting a $1.9 billion plan. One of its cost saving measures was the reduction of swing space that the organization would take. Given the precipitous rise of office rents in midtown and the widespread belief among real estate experts that the organization would have to pay astronomical rates for whatever space it could find, the UN's rationale seemed sound.

But if the terms of its lease at the Albano Building are any indication, that concern was overblown and the UN's efforts to stay within budget seem off to a good start. According to a source with knowledge of the organization's leasing negotiations but who couldn't speak on the record because they had not been authorized to reveal information about the deal, the United Nations will lease the entire 180,000 s/f building for rents that start "south of $50 per s/f." Such a rate is considered a pittance compared to typical rents in the district, which can easily rise above $100 per s/f for high-end buildings.

Of course, the Albano Building, which is owned by Extell Development Company, isn't a high-end building. Built in 1928, the 17-story property is solidly class B, with an unremarkable tan brick facade and terraced upper floors. Another caveat to the low rent is that the vacant interior of the property is completely gutted and will require the UN to spend extra money in order to construct offices within the space.

But the building, located at 305 East 36th Street, is just down the block from the organization's East Side campus, meaning that visitors to the facility and staff won't be rerouted far from the organization's longtime center of operations at the heart of a neighborhood with a dense collection of UN-affiliated tenants. Being the sole occupant of the building was also attractive because it will allow the UN a higher level of security, Schmidt said.

As part of its relocation, the UN also is taking space [??] Island City. 300 employee [??] IT personnel, will move into 80,000 s/f that the organization will lease in the recently constructed United Nations Federal Credit Union Building. The UN's 125,000 s/f library will be moved, in large part, to the Falchi Building, where it will expand significantly the amount of warehouse space it has in the building. Library staff will also be moved to DC 1 and DC 2, office buildings that were constructed by the UN next to its East Side campus in the 1980s.

The renovation of the UN headquarters will begin with the construction of a new conference building, a roughly 100,000 s/f temporary structure to be built on the campus's green lawn to the west of the Secretariat Building. That structure will provide facilities for the General Assembly while the governing body's normal meeting space is renovated. The work is scheduled to begin next year, with construction on the Secretariat Building to start soon after. Rumors have circulated in the Manhattan construction industry that a deal is close with the construction company, Skanska, to carry out the work.

The UN solicited bids from construction firms months ago, but according to Schmidt, only received three responses, an indication of not only how few companies there are that can tackle a project of such scope and complexity, but also of how thinly stretched both the city's construction industry and the supply of materials and equipment has become amid the current building boom in Manhattan.

As a consequence, United Nations officials have been vague about exactly when a construction firm will be named to the job and when the various stages of the job will be completed. Included in the United Nations' 10-year lease at 305 East 36th, in fact, is an extension clause that a source at Extell revealed was taken in case the work on the UN campus goes beyond the term of the lease, which extends to 2019. Such a scenario would likely be disastrous to the project's budget.

Schmidt said that he wasn't aware whether there was an extension in the lease, but asserted that the construction would be finished well before its 2019 expiration, with Work done likely in 2014 or 2015, he said.

Scott Panzer, an executive vice president and principal at Newmark Knight Frank, represented the United Nations in its deal at the Albano Buiding.