Because of the relatively high prices they are willing to pay in an office market that has begun to favor efficiency, hedge funds are becoming the darlings of commercial real estate landlords, brokers and interior designers, Crain’s reported.
Hedge funds are often willing to pay $125 per square foot in rent and spend $400 per square foot to decorate their offices and add amenities such as private gyms and four-star kitchens.
However, there are challenges to servicing these clients, too. Many only covet space in a handful of Plaza District office towers, including 9 West 57th Street, 767 Fifth Avenue, and 375 and 390 Park Avenue, and expect brokers to know those buildings — and which competitors occupy — them inside and out. Further, they often take smaller blocks of space and want to add risky infrastructure, such as executive showers, that could cause landlords nightmares. Finally, in the wake of the financial crisis, hedge funds are far more likely to collapse.
Crain’s noted that while some hedge funds are beginning to consider other locations, the prime Plaza district offices are still most sought after. Asking rents in 24 of those buildings average $114, and in 9 West 57th Street can reach as high as $170 per foot, more than three times the Midtown average of $60.20, according to Jones Lang LaSalle’s February market report. [Crain’s]