Is SL Green Still a Buy in a Transformed Manhattan Office Market?

The Manhattan office market has long been a barometer for commercial real estate trends, and SL Green Realty Corp. (NYSE: SLG) remains its most prominent player. With a 35% year-to-date decline in its stock price, the company has sparked debate among investors: Is this a buying opportunity amid a rebound in leasing metrics, or a value trap in a sector grappling with hybrid work and structural challenges? To answer this, we must dissect SL Green's valuation realism through its recent leasing performance, DCF valuations, and price-to-sales (P/S) ratio, while factoring in Manhattan's evolving fundamentals and refinancing risks.

Leasing Momentum: A Silver Lining in a Bifurcated Market

SL Green's Q3 2025 leasing performance has been a bright spot. The company signed 52 Manhattan office leases totaling 657,942 square feet, with an average rent of $92.81 per rentable square foot and an average lease term of 8.9 years as reported. This propelled same-store office occupancy to 92.4% as of September 30, 2025, with expectations to reach 93.2% by year-end. Such figures underscore SL Green's dominance in the high-quality Class A segment, where demand remains resilient despite broader office market headwinds.

Manhattan's office market has bucked the national trend, with vacancy rates dropping to 22.0% in Q3 2025-the lowest in over two years-driven by constrained new supply and a shift toward premium spaces according to Cushman & Wakefield. This aligns with SL Green's strategy to acquire assets like Park Avenue Tower for $730 million, which offer long-term rent growth potential as reported.

However, this momentum must be contextualized against the broader U.S. office market, where hybrid work adoption has kept utilization rates below pre-pandemic levels according to Credaily.

Valuation Realism: DCF Discrepancies and P/S Premiums

SL Green's valuation presents a paradox. On one hand, a DCF model from GuruFocus estimates an intrinsic value of $71.76 per share under a base-case scenario, implying a 38% undervaluation relative to the current price of $44.33. This model incorporates strong cash flow projections, including $244.82 million in Q3 2025 revenue as reported (surpassing forecasts by 56.02%) and a $0.34 EPS beat. On the other hand, a separate DCF analysis from AlphaSpread calculates an intrinsic value of $56.90 per share, suggesting the stock is trading 3.8% above its intrinsic value as of October 2025. The divergence stems from varying assumptions about long-term growth rates and discount rates, highlighting the subjectivity inherent in DCF modeling.

Meanwhile, SL Green's P/S ratio of 4.8x as of 2025 is notably higher than its peer average of 4.1x and the U.S. Office REITs industry average of 2.0x according to SimplyWall Street. A proprietary fair P/S ratio estimate of 1.9x further underscores the stock's premium valuation according to SimplyWall Street. This discrepancy raises questions: Is the market pricing in SL Green's premium asset quality and leasing momentum, or is it overestimating the durability of its current performance?

Structural Headwinds: Hybrid Work and Refinancing Risks

The hybrid work revolution remains a critical wildcard. While 66% of U.S. companies offer hybrid or remote work options, Manhattan's Class A office market has shown resilience due to its limited supply and demand for high-quality spaces according to Credaily. SL Green's focus on premium assets positions it to benefit from this bifurcation. However, long-term absorption trends remain uncertain. Nationally, the office vacancy rate stands at 18.7%, and utilization rates are still below pre-pandemic levels according to Credaily. If hybrid work permanently reduces demand for office space, even SL Green's premium assets could face downward pressure on rents.

Refinancing risks also loom large. In 2025, SL Green executed a $1.4 billion refinancing of 11 Madison Avenue at a 5.625% coupon and modified the 100 Church Street mortgage to extend its maturity to 2028 as reported. These moves reflect proactive debt management in a high-interest-rate environment. Fitch's recent affirmation of SL Green's 'BB+' rating with a positive outlook underscores the company's improved credit profile. Yet, the broader office sector's challenges-particularly for lower-quality properties-could strain liquidity if refinancing conditions tighten further.

Conclusion: Opportunity or Trap?

SL Green's 35% YTD decline has created a compelling valuation debate. The company's leasing momentum and premium asset positioning suggest a strong near-term outlook, supported by DCF models that imply undervaluation. However, the elevated P/S ratio and structural headwinds-hybrid work's long-term impact and refinancing risks-introduce uncertainty.

For investors, the key lies in balancing optimism with caution. If Manhattan's office market continues to outperform national trends and SL Green maintains its occupancy and rent growth trajectory, the current valuation could represent a buying opportunity. Conversely, if hybrid work accelerates the decline of office demand or refinancing costs rise sharply, the stock may be a value trap. Given the bifurcated nature of the market, SL Green's focus on Class A assets offers a hedge against broader sector weakness-but not a guarantee of long-term success.

In the end, SL Green's story is one of resilience in a transformed market. Whether it becomes a bargain or a cautionary tale depends on how well the company navigates the next phase of the office renaissance.