As major hedge funds close down or downsize, rental growth in trophy office buildings is also fizzling.
A new report by Jones Lang LaSalle shows that the petering demand from investment funds is causing a drop in rental growth and a spike in landlord concessions, the Wall Street Journal reported. Over the past year, rents at Class A Midtown office buildings rose 2 percent, while trophy properties remained static.
Cynthia Wasserberger, a managing director with JLL’s New York office, told the newspaper that the jump in landlord concessions became “painfully obvious this year.” Landlords were increasingly willing to offer 12 to 18 months in free rent and also renovations.
In late 2013, The Real Deal reported that boutique hedge funds were signing some of the biggest leases in Manhattan, sometimes paying over $200 a square foot. Hedge fund Citadel last year inked a deal to pay over $300 a square foot for the office penthouse portion of 425 Park Avenue, where it leases over 200,000 square feet.
Wasserberger noted that last year, 138 deals were signed with asking rents of $100 a square foot or higher.
“We had never before seen those kind of numbers,” Wasserberger said. “But this year will be well off that peak.” [WSJ] — Kathryn Brenzel