Navigating the rent Gap: Trophy vs. Non-trophy
In a previous post we discussed the increase in Trophy rental rates in New York and across the country. Our JLL research team has found that this gap will likely continue to widen in the near-term. So, what does this mean for investors and occupiers?
Specifically, the top-tier Trophy buildings in New York are performing better than the larger overall market. The rise of specialized, high-end financial services—hedge funds, private equity and sovereign wealth management—has driven demand and pricing in Manhattan’s top-tier Trophy market.
As noted by JLL New York’s Director of Research Tristan Ashby, in a recent GlobeSt.com article, “available trophy space in Midtown, in particular, is in scare supply.” The vacancy rate for trophy-quality buildings in Midtown was 8.4% in the first quarter of 2015, while the overall vacancy rate for Midtown assets stood at 10%.
While the larger rent averages have not returned to pre-recession levels, rental rates among Manhattan’s most exclusive Trophy buildings have reached new highs. Major office development and returned space are scheduled to come on line over the next few years, which could lessen overall rental growth, but opportunities among these buildings remain limited, spurring both rental and sales prices for current assets.
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