NEW YORK CITY—Trophy rents have returned to levels suited to Manhattan's office towers of the same caliber as demand from smaller financial services tenants continues to drive both activity and pricing, according to a new report from JLL focused on activity this spring. While the flourishing media and tech industries have driven demand for some trophy office buildings—particularly in Midtown South and Downtown—weak employment growth in large financial and legal services firms continues to restrain overall absorption within the city's high-end product.

JLL found that pricing at the top of the market has reached its strongest level since 2008. In 2013, 81 transactions with rents starting at $100 or greater were recorded, up from 51 in 2012. Year-to-date activity remained robust, with more than 20 properties now posting direct asking rents greater than $100 per square foot, compared to just 14 in the spring of 2013. Within this category, an even smaller set of buildings with Central Park views commands rents ranging from $150 to $200 per square foot.

While accounting for a minimal amount of the overall velocity—the median size of leases in this micro-market was less than 10,000 square feet in 2013—these transactions drive industry chatter and are said to provide benchmarking for the rest of the trophy market.

“Pricing and velocity at the top of the market have reached their strongest levels since 2008,” says Peter Riguardi, president, New York tri-state operations. “More than half of Manhattan's top-tier trophy properties posted a vacancy rate of less than 5.0 %. Demand from smaller financial services tenants, including hedge funds and private equity firms, has increased parallel to recent Wall Street gains. Compounding this demand, sovereign wealth funds and other foreign-based financial tenants have emerged as new occupiers, leasing Manhattan locations that are equivalent in profile to their offices in London, Singapore or Hong Kong.”

The city's top-end office buildings posted a rate hike of 5.1% to $76.02 per square foot in spring 2014 from $72.33 per square foot six months earlier. New York's trophy product saw rents increase 3.6% from $73.35 per square foot one year earlier.

JLL found that average asking rental rates for Lower Manhattan's trophy office product have reached levels not recorded since spring 2009. Downtown rates totaled $61.24 per square foot in spring 2014, 2.8 % above $59.58 per square foot six months earlier and 5.7 % higher than $57.95 per square foot a year ago.

“Downtown continues to attract value-minded tenants with high-quality construction, improving amenities and some of the best views in Manhattan,” notes Riguardi. “Tepid growth in financial and legal services has resulted in large blocks of discounted sublease space on Avenue of the Americas and elsewhere. While value seekers have quickly leased this space, the low pricing has weighed down the average and undercut asking rents on direct space. In the first quarter of 2014, prices began to rise as sublease space started to diminish.”

The report reveals that average asking rental rates for Midtown trophy product have risen consistently over the past year. The submarket saw trophy rents surpass $90 per square feet for the first time since spring 2008.Midtown rates rose to $90.49 per square foot in the spring 2014, increasing 5% from $86.16 per square foot six months earlier. The submarket saw trophy rents expand 6.4% from $85.08 per square feet one year earlier.