The era of the triple-digit rents at New York City offices is back, with boutique financial firms signing 80 deals at $100 per square foot or more in 2013, according to a new Jones Lang LaSalle report.
The number represents a big leap from 2012, when only 51 deals with rents of $100 or more per square foot were signed, the report says. At the height of the office market in 2008, 91 such deals were signed, according to JLL managing director Cynthia Wasserberger.
“These trophy leases are market indicators of the health of the boutique financial-services industry that includes hedge funds and private-equity firms,” Wasserberger told the New York Post, “and indicates growing confidence in their businesses going forward.”
In June 2013, for example, publicly-traded hedge fund Och-Ziff Capital Management Group agreed to pay rents of over $200 per square foot for the upper floors of the Solow Building at 9 West 57th Street, as The Real Deal reported.
Rising demand for trophy offices space on higher floors has also squeezed the inventory of such spaces, according to the paper. The current vacancy rate for office space above the 25th floor is just five percent, representing a strong recovery from 2002, when companies avoided upper floors following 9/11.
To be sure, deal sweeteners – such as free rent and tenant improvement allowances — are more prevalent nowadays than in 2008, according to Wasserberger. Tenants received an average of 3.8 months of free rent in 2008, versus 6.7 months in 2013, while the average TI was $30.49 per square foot in 2008 compared with $61.13 per square foot in 2013.
“So while the starting and face rents are back, the net effective rents are well off peak levels,” she said. [NYP, 1st item] – Hiten Samtani