Demand for New York’s premier office buildings has not only rebounded, but it’s causing a ripple effect.
Large tenants whose leases are coming to an end in the next few years are scrambling to secure space in Trophy Tower while it’s still hot.
Meanwhile, towers yet to be built, including 175 Park Avenue, 347 Madison Avenue, 3 Hudson Boulevard, 70 Hudson Yards, and 2 World Trade Center, are getting 1ft. The company is luring anchor tenants with rents of $200 each. From the ground.
“There will come a moment when there will be a shortage of high-end products,” said David Goldstein of Savills.
Midtown’s better buildings have an occupancy rate of 8.5%, compared to 15% four years ago, according to Newmark. Overall, Midtown availability is 16.6%, compared to 13% on a direct basis without sublets. The average rent in Trophy is $143 per foot, while the rest of Midtown averages $83 per foot.
“Tenants are spending more money to live in the best buildings with the best amenities and appearance,” said Newmark’s David Falk.
That’s why there aren’t “great” options for large tenants in prime locations in Midtown, explained RXR’s Bill Elder. RXR is one of the developers of 175 Park, which owns and leases buildings including 5 Times Square and Worldwide Plaza.
“Look at the current effective vacancy rate and look at the new building construction schedule,” Elder said. “We don’t have space at Park, Madison and 6th Street. The A- and B++ buildings might actually have elevators.”
To capture that demand, SL Green’s 245 Park Avenue is being transformed with a new low-rise façade and amenities like a rooftop park. 300,000 square feet of space available.
“The market isn’t gangbusters, but it’s stronger than anyone realizes,” Faulk said.
“The old real estate slogan was “location, location, location,” but that has evolved to “new construction, new construction, new construction.” Now it’s also “location, renovation, and amenities.” ”
Peter Turchin of CBRE
Brookfield’s reimagined 660 Fifth Avenue has another 850,000 square feet for sale. But it could be absorbed into Citadel, for example. For the next decade or so, Citadel will be roaming around 400,000 to 800,000 square feet, one of its current offices at 350 Park Avenue, which will be demolished and replaced so it can be reoccupied. will be ready.
Financial company Jefferies, currently located at 520 Madison Ave., is also seeking 800,000 square feet, brokers said.
Once its new 2.5 million square foot headquarters at 270 Park Avenue is completed, JPMorgan Chase will likely keep its tower at 383 Madison Avenue, but brokers say it will keep the tower at 390 Madison Avenue, which it rented during construction. It said it may also retain the street address and space at 277 Park. A JPMC spokesperson said the new building is expected to open by the end of 2025.
“With 2.5 million square feet of flexible, collaborative space, we can easily adapt to the future of work,” said spokesman Michael Fusco.
Small financial tenants also struggle to find quality rental space in the Plaza District. Adam Hennick of Current Real Estate Advisors said all of the buildings he called to clients looking for 10,000 square feet by the end of the summer were either just leased or had already been leased.
“Most of the vacant units are at the base of the building, with poor light, poor air quality, and no views,” Hennick said.
Because of the need for speed, Lever House, located at 390 Park Avenue, is building two 10,725-square-foot prefabricated floors at a price tag of $200 per foot. After his 12th floor marketing space at Lever House was occupied by tenants, he decided to build two more floors.
“The tenant did not leave enough time” [for build-outs] And it helps show off the building,” said CBRE agent Caroline Melk.
Brokers say tenants are willing to pay for well-managed, well-located space. That’s why, after quickly leasing the existing floors at 527 Madison last year, Mitsui Fudosan America may do the same with the 11,500-square-foot eighth floor, which has access to the building’s outdoor terrace.
Edward J. Minskoff Equities’ current private amenity at 590 Madison on East 57th Street to attract tenants after IBM moves into One Madison, according to CBRE agent Brett Shannon. The space will be renovated by Gensler architects and services will be provided throughout the building. Asking rents for IBM’s 250,000 square feet of space range from $106 to $120 per foot.
“The old real estate mantra was ‘location, location, location,’ but that has evolved to ‘new build, new build, new build,'” said Peter Turchin of CBRE. Now it’s also “location, renovation, and amenities.” ”
