Trophy Rents are Back in CRE Game after Three Slow Years
After peaking at $96 per square foot in winter 2008 and falling ever since, asking rents at Manhattan’s trophy office buildings are on their way back up, increasing from an average of $67.58 per square foot to $68.09 over a six-month period, according to Jones Lang LaSalle’s semiannual Skyline Review. The report also notes that vacancy rates at these top-tier properties have tightened from 13.1 percent in December 2009 to 10.1 percent at the end of 2010.
“Since New York’s office market has reached bottom, activity is expected to strengthen in the near-term, with recovery beginning at the top end of the market,” said James Delmonte, vice president and director of research for JLL’s New York office, in a release. Average asking rents among Midtown’s trophy set of properties have moved higher in recent months, and several of the submarket’s top-end buildings have recorded asking rents north of $100 per square foot on some select spaces, the report shows. However, while landlords in trophy properties appear eager to raise asking rents, “it’s less clear whether there will be enough demand to push average trophy rents significantly higher in the near term,” Delmonte observed.
The increases seen in these trophy offices occur as part of a broader pattern of improving fundamentals across Manhattan’s office submarkets, according to real estate firm CB Richard Ellis. In Midtown, average asking rents vaulted up $2.15 to $57.97 per square foot at the end of February, in the highest single-month increase seen here since June 2007, CBRE says.