Office Leasing Returns to Pre-Pandemic Levels in Manhattan
Trophy Offices in High Demand
Trophy offices are so hot, brokers say tenants better put a ring on it before someone else does.
Adam Henick of Current Real Estate Advisors had financial clients that were eyeing the newly built boutique office building at 360 Bowery near Soho that could have housed numerous family offices and well-funded tech funds. Then, he recalled, “In one fell swoop all that supply was taken off the market because Chobani leased the entire building.”
New Developments and Leasing Activity
Leading the city’s stats, leasing in the Plaza District hit 3.26 million square feet in the last quarter of 2024. This includes a Citadel lease for 504,000 square feet at Brookfield’s 660 Fifth Ave. that paves the way for its current offices at 350 Park and the adjacent 40 E. 52 St. to be demolished and rebuilt with 1.8 million square feet touching 1,600 feet high — but it won’t be ready until … oh, maybe 2032.
Since there is little new development rolling out and another 100 million square feet in “zombie” properties that can’t sign deals due to fiscal or other issues, the unspoken for portion of the remaining 360 million feet is getting all the action.
Market Trends and Rents
JLL reported overall leasing hit 30.2 million square feet and was the most since 2018 with a vacancy of 18%. A record 28 deals were signed above $200 per foot with 212 above $100 per foot.
Leases for two full floors at Stefan Soloviev’s 9 W. 57th St. with Tikehau Capital and Platinum Equity were among those signed at over $200 a foot.
“There are fewer opportunities and fewer buildings that can meet the market,” said Mark Weiss of Cushman & Wakefield. “We went from weak market to a tight market within a year. Premium buildings and premium locations have great pricing power.”
Future Developments and Submarkets
The most recent deals at Lever House at 390 Park Ave. were all signed above $200 per foot, well outpacing the average trophy rent of $150 per foot, according to CBRE. Remaining floors now have asking rents ranging from $240 to $280 per foot.
Market rents for investors are being underwritten 20% to 30% higher since the pandemic, especially around Park Avenue and for towers with access to Grand Central Terminal. The trophy One Vanderbilt, for instance, is getting nearly $300 per foot — when available.
“This is obviously a changing market, the type of workplaces [people] want to be in, the neighborhoods they want to be in, the type of buildings they want to be in,” said Scott Rechler of RXR. “There’s a flight to quality.”
Conclusion
The Plaza District is the tightest submarket and because capital markets have suffocated construction, Henick said that dynamic won’t change very soon. As companies continue to seek out premium office space, the demand will broaden to other submarkets, including downtown and Hudson Square.
FAQs
Q: What is driving the demand for trophy offices in Manhattan?
A: The demand is driven by companies seeking premium office space with unique amenities and locations that offer a high quality of life.
Q: What is the current vacancy rate in the Plaza District?
A: The current vacancy rate in the Plaza District is 18%.
Q: What is the average asking rent in the Plaza District?
A: The average asking rent in the Plaza District is around $150 per foot.
Q: What is the most recent deal signed at Lever House?
A: The most recent deals signed at Lever House were all above $200 per foot.
Q: What is the future of office leasing in Manhattan?
A: The future of office leasing in Manhattan is expected to continue to be driven by demand for premium office space with unique amenities and locations that offer a high quality of life. As companies continue to seek out these types of spaces, the demand will broaden to other submarkets, including downtown and Hudson Square.
