James Delmonte, VP and director of research at JLL, tells GlobeSt.com that directly after 9/11 there was a slowdown for tower leasing. "When we first started looking at the data and going through the numbers roughly two months ago for this report, although we knew there would be a premium," he explains, "we were surprised at how high it actually was."
CB Richard Ellis' research numbers also show that the demand is there. The company tells GlobeSt.com that the average asking rent in midtown is $81.34 per sf. As far as Midtown tower floors rents go: rent for the 32nd and 33rd floor at 1095 Avenue of the Americas goes for $150 per sf; the 47th floor at 1 Bryant Park fetches $185; and 745 Fifth Ave. gets $160 for the 30th floor. For Downtown, the average asking rent is $46.37 per sf; however, 32 Old Slip fetches $75 per sf for the 34th through 36th floor and 17 State St. gets $75 per sf. According to Silverstein Properties website, 7 World Trade Center's rate per sf for the 46th through 50th floor is $75 per sf.
According to JLL, as of the end of Q2 this year, the average taking rent was $63.75 per sf compared to $86.36 per sf for tower floors. While asking rents and taking rents for tower floors have increased to record-highs, the average premium has similarly risen over the real estate cycle. The report noted that in some Midtown pre-eminent addresses, starting rents are getting as high as $150 per sf. As of the end of the Q2 '07, there were 38 deals completed, more than half of which were in tower floors, with starting rents in excess of $100 per sf compared to 14 for all of 2004 and 18 in 2005.
Delmonte tells GlobeSt.com that the reasoning behind the numbers is that resurgence of the financial sector has propelled activity. "Hedge funds in particular have flourished over the last several years and have a considerable impact on pricing," he says. "Since there are more insensitive to pricing and are a little more flexible, they typically locate in high-end office buildings."
The report explained that financial services are the largest leasing industry in tower floors, accounting for over 50% of total activity in 2006. Legal service firms follow, comprising nearly one-quarter of tower floor leases.
Delmonte believes that tower floors will continue to garner a premium over market, especially due to the current supply constraint. The overall vacancy rate for class A space in Manhattan dipped to 7% at the close of Q2, however it is only 2.5% for tower floors. The report concludes that "the low tower floor vacancy rate coupled with unabated demand all buy guarantees sky-high rents for sky-high spaces."
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
