Midtown Class A office space had an average asking rent of around $65 per square foot in May.
But Harry Macklowe’s tenants at the General Motors Building are expected to pay more than two and a half times that.
The 1.9-million-square-foot building at 767 Fifth Avenue, purchased by Macklowe for a then-record $1.4 billion in 2003, now has office rents that have hit $175 a square foot.
With its retail rents topping $1,200 a square foot, the GM Building looks to be leading the pack in terms of having the combined highest office and retail rents in Manhattan, brokers say.
An available suite at the GM Building taking up 6,000 square feet of the penthouse floor leases for $175 a square foot, even though the $100-a-square-foot rent benchmark is still broken by only a handful of buildings in Manhattan.
According to a study by Jones Lang LaSalle, there were 16 Midtown office buildings that broke the $100-a-square-foot rent level in 2005.
The GM Building’s rent record is tied by one other building, 9 West 57th Street.
A 30,000-square-foot space in the top floor of the 50-story tower, with prime views of Central Park, is also going for $175 a square foot, the New York Post reported last month, saying that the office space is the priciest in the nation. The address is coveted as one of New York’s most recognizable buildings “even before you see that big red 9,” said Neal Sroka, a senior vice president of the Corcoran Group who specializes in commercial properties.
The GM Building only pulls ahead in the rent race when one considers its pricey store space.
After Macklowe’s purchase, the building got a retail upgrade that included a big shiny glass “cube” that now houses an Apple Computer flagship store. The $1,200-a-square-foot rents there set a new threshold for Manhattan retail, according to brokers.
“There were a lot of spaces on the market at the $700- to $900-per-square-foot mark, then spaces like [Harry] Macklowe’s piece at the General Motors Building came on the market and that was new and had pizzazz with all glass,” Robin Abrams, executive vice president at Lansco Corp., told The Real Deal as part of a Q & A with retail brokers (see Retail Q & A). “That came on the market at $1,200 a square foot — and that became a benchmark that brought up the average.”
The transaction to bring Apple to the site won a Real Estate Board of New York most creative retail deal of the year award last month. Brokers Robert K. Futterman and Karen Bellantoni of Robert K. Futterman & Associates won the award for representing Apple in the 22,500-square-foot lease of lower-level space.
Nine West 57th Street also has costly retail rents, but due to its side street location, nothing approaching the level of the GM Building.
Still, its asking retail rents of $400 a square foot are high for the area, thanks to Sheldon Solow, the building’s notoriously picky landlord, who brokers say is intent on maintaining his roster of top-shelf tenants.
“[The building has] one of the most difficult landlords in the world,” Sroka said. “It’s the closest thing there is to a co-op board. Mr. Solow takes real pride making sure every tenant is first-grade. He makes it even more exclusive.”
Solow is so picky, in fact, that there are 15,000 square feet of available retail space on the building’s ground floor — at $400 per square foot, $100 higher than any retail space on the street — and it has been vacant for months, according to Sroka.
But the bulk of both buildings, of course — and the main source of their landlords’ revenue — is office space.
The prices the two buildings can charge office tenants are simply “a function of location and tenant roster,” said Peter Turchin, vice president at CB Richard Ellis, which represents the GM Building.
“The market has been extremely heated, especially for high-end product,” he said. “It seems this is a market leasing from the top down. The economy is in very good shape, and as a result people are looking for prestigious office space.”
Benjamin Friedland, also a vice president at CBRE, points out that power likes to hang with power.
“One of the bigger draws with very high-end groups is they want to be in buildings where their contemporaries are,” he said, pointing out that “the GM Building has the best-of-the-best of the financial service world,” including Carl Icahn, Thomas H. Lee Partners, York Capital and Richard Perry’s hedge fund as tenants.
9 West 57th is also filled with blue-chip companies: Chanel, MBNA America, Cendant, Bank of America, Kohlberg Kravis Roberts, Apollo Real Estate and others. Avon, one of the building’s banner occupants, left recently, opening up large swaths of property now up for grabs.
But for those considering a move, it begs the question: Is the steep price tag really worth it?
Sroka said that in addition to sweeping park views, “AAA Plaza District” location and a clean, modern design that defies the building’s 32 years, 9 West 57th boasts a few unique qualities. For one, the dramatic, angular exterior makes for an impressive statement on the street, while the interior lends an intimate boutique quality that many hedge funds and financial clients seek.
While Solow is a picky landlord, Sroka said that sort of exclusivity can be a real value to those looking to boost their image. Internationally, recognizable landmark addresses hold a certain cache, Sroka said, while in the United States, there is a return to a more traditional mentality of valuing prestigious, established quarters — as opposed to the hip, downtown loft spaces that have been in vogue for a decade or more.
“People are putting on ties again,” he said. “There is a certain amount of legitimacy a business has in a space like this — and people know that.”
In addition to the GM Building and 9 West 57th, some of the other top office rents can be found on Park Avenue, in buildings like the Seagram Building and Lever House. Top floor space at Lever House is currently going for $150 a square foot, the Post reported.
660 Madison Avenue, which sits atop Barney’s at 60th Street, is another prime office address. The 225,000-square-foot building was purchased last month by Broadway Partners for $220 million, or around $863 a square foot.
The Plaza District, Manhattan’s priciest submarket, which centers around the Plaza Hotel, notched average asking rents of $75.94 a square foot in May, according to a report by Colliers ABR. While rents have been rising significantly throughout the Manhattan office market, $150-plus rents are still head and shoulders above the rest of the market.
Midtown Class A office space had an average asking rent of $65.47 in May, and Manhattan office space overall had an asking average rent of $44.73.