Plaza District office rents are rising quickly, due to a lack of available space on the upper floors of trophy office towers, according to a recent market report by Avison Young.
The Plaza District is seeing asking rents of around $130 per square foot, up $30 per foot from the fourth quarter of 2013, according to the report. To date, there have been 18 deals with starting rents north of $100 per square foot this year, compared to only 13 at this time a year ago, the data shows.
“There’s a feeling in the marketplace where landlords are saying ‘well, if these buildings are getting stratospheric rents then why not me?” said John Ryan III, a principal at Avison Young.
Recent Plaza District deals that have pushed the envelope on rents include Dow Chemical’s deal for an 18,244-square-foot space at 499 Park Avenue, inked in January. The company will pay rents starting at north of $130 per square foot at the 28-story, 303,000-square-foot office building.
And Baron Funds upped the ante last month when it agreed to pay rents starting at just shy of $200 per square foot for 5,000 square feet at the GM Building, at 767 Fifth Avenue.
Ryan said lack of inventory, particularly of mid-sized spaces on high floors at Class A buildings, the types of space traditionally sought by financial firms, are pushing rents skyward.
Buildings like 40 West 57th StreetAnd 9 West 57th Street are reportedly asking about $150 and $200 per square foot on their upper floors, respectively.
“If you were looking for 7,500 to 12,500 Square Feet From 55th Street to 65th street between Seventh and Park avenues, I can come up with only 30 available spaces,” Ryan said. “Out of those 30, only seven of them would be on a floor above the 25th floor of the building. If tenants are going to spend the money to be in some of these really Class A buildings, they’re going to want the views that go along with that.”