Manhattan office market sees boost in high-end lease deals

Manhattan has seen an uptick in office leasing deals with rents per square foot in the triple digits in the first half of the year, signifying a growing demand for premium office space, the Wall Street Journal reported.

There have been 35 deals with rents north of $100 per square foot so far this year, compared to 41 in all of 2012, according to research from Colliers International seen by the Journal. The 2007 peak of the market saw 113 deals, while at the bottom – in 2009 – there were just 17.

A handful of Manhattan trophy office buildings – such as the Seagram Building at 375 Park Avenue and Sheldon Solow’s 9 West 57th Street – have always been able to command top dollar from financial companies. Indeed, hedge fund Och-Ziff Capital Management Group recently paid rents in the $200s per square foot for space on upper floors at 9 West 57th Street, as The Real Deal reported.

But even these buildings have seen a rise in activity, Alan Desino, an executive at Colliers, told the Journal.

“As we went into the big recession, these big $100 deals dropped off the cliff, but now smaller boutique financial firms, as the equity markets have rallied, are doing well,” Desino said.

Ken McCarthy, chief economist at Cushman & Wakefield, told the Journal that the amount of top-drawer Manhattan office space is diminishing, and a lot of this year’s premium leasing activity represents growth through new leases and expansions, with very few lease renewals.

“To them, the building and space serve a purpose beyond just where they operate,” McCarthy said of hedge funds and private equity firms, implying that the prestige factor was key. [WSJ]  – Hiten Samtani