The Real Deal New York

Hedge fund weakness weighing on Midtown office market

Funds signed a mere 44 leases at $100 psf or more in Midtown this year

November 01, 2016 09:05AM

Midtown Manhattan

Midtown Manhattan

Hedge funds, bogged down by weak returns and rising competition from passive funds, aren’t leasing $150-per-square-foot offices like they used to.

Year-to-date, a mere 44 hedge funds signed leases in Midtown Manhattan for $100 per square foot or more, according to JLL TRData LogoTINY. Last year 138 did so. Top asking rents have also been falling – to $137 per square foot from $143 per square foot in April.

Hedge funds only accounted for 10 percent of all newly leased Midtown Class-A office space in 2015, but because they tend to pay higher rents their financial significance is far greater. When Ken Griffin’s hedge fund Citadel leased 200,000 square feet at L&L Holding’s new office development 425 Park Avenue last year, it paid $300 per square foot for the penthouse portion.

Hedge fund returns have trailed the S&P 500 this year, making it harder to justify the hefty fees they charge. Meanwhile, passive funds that merely track indices and charge far lower fees have been growing in popularity. In the third quarter alone, investors withdrew $28 billion from hedge funds. [NYP]Konrad Putzier 

DATA PACKAGES

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NYC Office Leases Transactions Price
Jan 1st 2011 to Oct 1st 2016 4,000 $500
Jan 1st 2004 to Dec 31st 2010 6,000 $500
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