New York’s Trophy Buildings Continue to Outperform Larger Market
While Manhattan’s growing economic diversification into high-tech and other creative industries is welcome news for the larger economy, JLL New York’s research team has found that financial and legal services continue to drive occupancy and pricing at the top of the market. The majority of New York’s most expensive properties remain clustered around the Plaza District, but high prices have spread south to Bryant Park and west to Columbus Circle and Times Square.
According to JLL’s research team, pricing at the top of the market continues to reach, and surpass, the strongest levels seen since 2008. By fall 2014, Manhattan had recorded 99 transactions with rents starting at $80 or greater, up from 86 in 2013 and 51 in 2012. More than 23 properties now post direct asking rents greater than $100 per square foot, compared to 21 in spring 2014 and 14 in spring 2013. Within this category, an even smaller set of buildings with Central Park views commands rents averaging around $145 square foot.
While accounting for a minimal amount of the overall velocity — the median size of leases in this micro-market averaged approximately 11,500 square feet in fall 2014, up from 10,000 square feet one year before — these transactions fuel industry chatter and are said to provide benchmarking for the rest of the trophy market.
The city’s top-end office buildings posted an overall rate hike of 4.2 percent to $79.18 per square foot in fall 2014 from $76.02 per square foot six months earlier. New York’s trophy product saw rents increase 9.5 percent from $72.33 per square foot one year earlier.
“Despite recent fluctuations, stock market indices have posted large gains since 2009, promoting renewed confidence, higher assets under management and strong demand for Manhattan’s best-quality space,” said Peter Riguardi, president of JLL’s New York tri-state operations.
“One of the most prominent themes in Manhattan has been relocation and migration, with many tenants opting for space that fosters efficiency, value and employee retention and recruitment. This movement has impacted Downtown, in particular, where the largest trophy transactions were completed by firms migrating from elsewhere in Manhattan.”
Read more about leasing activity and vacancy rates in Manhattan’s trophy properties here.