Trophy offices are so hot, agents say tenants better put a ring on them before someone else does.
Adam Henick of Current Real Estate Advisors had financial clients eyeing the newly constructed boutique office building at 360 Bowery near Soho that could have housed multiple family offices and well-funded tech funds. Then, he recalled, “In one fell swoop the entire supply was taken off the market because Chobani leased the entire building.”
Even the main downtown Plaza District that includes Fifth, Madison and Park streets north of Grand Central will soon have “No Vacancies” signs.
Topping city statistics, leasing in the Plaza District reached 3.26 million square feet in the final quarter of 2024. That includes a Citadel lease for 504,000 square feet at Brookfield’s 660 Fifth Ave. making way for its current offices at 350 Park and adjacent to 40 E. 52 St. it will be demolished and rebuilt with 1.8 million square feet touching 1,600 meters high – but it won’t be ready until … oh, maybe 2032.
With little new development and another 100 million square feet in “zombie” properties that can’t sign deals due to fiscal or other issues, the unspoken remaining 360 million feet are getting all the action.
JLL reported that total leasing reached 30.2 million square feet and was the highest since 2018 with a vacancy rate of 18%. A record 28 deals were signed above $200 per foot with 212 above $100 per foot.
Two full floors for rent at Stefan Soloviev’s 9 W. 57th St. with Tikehau Capital and Platinum Equity were among those signed at over $200 per foot.
“There are fewer opportunities and fewer buildings that can meet the market,” said Mark Weiss of Cushman & Wakefield. “We went from a weak market to a tight market within a year. Premium buildings and premium locations have great pricing power.”
The latest deals at Lever House at 390 Park Ave. all were signed above $200 per foot, well above the average trophy rent of $150 per foot, according to CBRE. The remaining floors now have asking rents ranging from $240 to $280 per foot. CBRE, whose main offices are at 200 Park, even built six floors at Lever House for its “global financial headquarters” with two as flexible space for key executives, who also use its luxury club.
Investor market rents are signing 20% to 30% higher since the pandemic, especially around Park Avenue and for the towers with access to Grand Central Terminal. The One Vanderbilt Trophy, for example, is fetching nearly $300 a foot — when available.
“This is definitely a changing market, the type of jobs [people] want to be in, the neighborhoods they want to be in, the type of buildings they want to be in,” said RXR’s Scott Rechler. “There is a flight to quality.”
Rechler’s Commodore Tower at 175 Park Ave. near Grand Central Terminal already has a 453,000-square-foot Park Hyatt in hand, but the pending 2.8 million-square-foot behemoth from RXR, TF Cornerstone and Michael Dell’s firm DFO Management needs a boost from a major office anchor for him. fill the remaining 2.1 million square feet.
The Plaza District is the tightest submarket, and because capital markets have stifled construction, Henick said the dynamic won’t change anytime soon.
Other projects that need anchor tenants before receiving construction financing include BXP’s 347 Madison Ave., which is asking rents from $175 per foot at the base to over $300 at the top.
“They are not getting price resistance,” said one broker who requested anonymity. But brokers hope BXP doesn’t cut an anchor because, they say, “Build it and the tenants will come.”
“The story of 2024 was how well Midtown has done, but as a company [seeking space] realize that what they want doesn’t exist, the demand will expand to other submarkets.”
CBRE’s Howard Fiddle
The floors at Alchemy-ABR’s all-new 125 W. 57th St., all of which overlook Central Park, are expected to be gobbled up by those in need of roughly 11,000 square feet of floor tile.
SL Green’s 245 Park Ave. it is undergoing renovation and is expected to receive high rents as well.
Between West 42nd and West 43rd Streets, the new boutique 520 Fifth Ave. includes access to his private club. He will open later this year and negotiate some deals.
“The building is on fire and a complement to Nicky Rabina and what a great developer he is,” said investment sales broker Doug Middleton of CBRE.
Next door at 522 Fifth Ave., owner Aby Rosen said he has worked out the finances on the vacant building and is targeting companies that want a corporate headquarters.
Gary Barnett’s tower at 570 Fifth Ave., with an IKEA at its base, won’t be available for at least three years.
However, renters who first start looking at that time will have difficulty finding solutions, Henick explained.
Further from Grand Central Terminal and Hudson Yards, demand is weaker and rents are lower — now averaging about $77 per foot overall.
“The story of 2024 was how well Midtown has done, but as a company [seeking space] realize that what they want doesn’t exist, demand will expand to other submarkets,” predicted CBRE’s Howard Fiddle.
Since not every company can afford $200 a foot, Fiddle believes tenants will also make fiscally cautious moves downtown, where Colliers reports an average rent of $57.03 a foot.
Already, Colliers reports that total downtown leasing of 2.27 million square feet was the highest since 2014.
Fiddle is part of the leasing team for 60 Wall St., where asking rents start at $70 a foot. Owner Paramount Group has a $250 million renovation underway for the completely vacant 1.6 million-square-foot former headquarters building.
Just north of Tribeca in Hudson Square, Disney is settling into its new digs, and brokers believe it will boost the area’s restaurants and retailers.
Taconic Partners and Nuveen’s One Grand, a 28-story, 478,000-square-foot boutique office building designed by SHOP that will include a new public school on the ground at 76 Varick St., may also break ground. owned by Trinity Church.
Nearby, Hudson Square Properties, a joint venture, redeveloped 345 Hudson St. joining it with 555 Greenwich St. This now 1.7 million square foot building has new amenities, a town hall and rooftop terraces.
In Midtown, Paramount Group’s 1633 Broadway has 40,000 to 50,000 square feet of floor tiles and rents in the $60s to $80s per foot. There’s an Equinox, plus its new restaurant, Din Thai Fung, has a cult following, and a new lobby renovation is imminent.
Unique hospitality-like amenities are creating bidding wars for offices at 10 Grand Central.
“We have four groups competing for the same space,” said Craig Deitelzweig of Marx Realty. “We built two floors of prefabricated buildings and they are all gone.”
Here, Marx has 11,000 square feet of amenities that include a stylish 200-seat town hall that “everybody wants for events and product launches,” and had city approvals in time for his holiday party, complete with rocket and sushi. A podcast room and a movie spot are in the adjoining areas, while a second floor of amenities has a meeting room and cozy and visible igloo on its terrace.
“Tenants want amazing spaces and they want to enjoy going to work and if you don’t make it special and special, it won’t rent. But if you do, you’re going to get high rent,” Deitelzweig said.
Three floors of approximately 12,000 square feet will be available this year at Marx’s 545 Madison Ave. which is co-branded with Baccarat. Asking rents range from $120 to $130 a foot – and he expects to get that price.
When customers travel and can compare new construction even with glass towers built 50 or 60 years ago, they can see huge differences. “You can add fixtures and you can refresh the lobby, but you’re not removing the columns or making the windows bigger,” Henick said. “This is one of the issues that will plague the market.”
#Companies #vying #office #space #Manhattan #prices #rising
Image Source : nypost.com