Hedge funds are paying extra to rent offices in the top 25 trophy towers.
A new JLL report found that the financial firms’ rent is so damn high that all 25 properties top $100 per square foot, with three of the buildings asking $200 per square foot for sky-high tower and penthouse floors.
These properties include Tishman Speyer’s 520 Madison Ave., Blackstone’s Park Avenue Tower at 65 E. 55th St. and Solow’s 9 W. 57th St. And Leonard Stern’s 667 Madison Ave. is a “mere” $195 per square foot.
In fact, Cynthia Wasserberger and Haley Shoener, the JLL brokerswho authored the report, found the demand is so robust by hedge funds, investment managers and boutique financial firms for these Plaza District buildings that the average asking rent is $144 per square foot, up 4 percent from $138 per square foot in September 2016.
The newest available space is the large block JLL is leasing at One Columbus Circle on behalf of Related Cos., which has an asking rent of $155 per square foot. Time Warner is vacating 1.8 million square feet there when it moves to Hudson Yards. Both that project and Manhattan West are driving pricing and interest in trophy towers, the brokers found.
The McKool Smith law firm signed a lease for more than $100 per square foot at Brookfield’s future One Manhattan West while another law firm, Cooley, did the same at Related’s upcoming 55 Hudson Yards.
But don’t think the less well-heeled are being left out of prized places. They can find spots on lower floors with average asking rents of $89 per square foot, which is 3 percent less than last fall.
At $68 per square foot, the cheapest direct space is at TF Cornerstone’s Carnegie Hall Tower at 152 W. 57th St.
The report attributes the drop in average asking rents on lower floors to several available subleases, especially in nine of the properties.
Although the average sublease now has a 25 percent discount compared with direct space from the building owner, subleases in trophy towers have a 38 percent discount.
One of the least expensive subleases is at Vornado’s 640 Fifth Ave., where EII Capital Management has the stunning eighth-floor space of 19,355 square feet available through CBRE for $69 per square foot.
Discounted subleases may reflect a short time frame remaining on the lease, the inability to extend, the condition of the space and any furnishings, or the sub-landlord’s credit risk.
The most expensive sublease space, at $125 per square foot, can be found at a Boston Properties tower at 510 Madison. Ave.
Several redeveloped properties are also headed to the core Midtown market and will likely join the trophy rental ranks. These include Boston Properties’ 159 E. 53rd St. at the base of its 601 Lexington Ave. and its 399 Park Ave., as well as L&L’s 390 Madison Ave. and 425 Park Ave., where its office lease with Citadel for the top floor has already exceeded $300 per square foot.
In one new hedge fund deal, Soroban Capital Partners signed a lease at SL Green’s newer Tower 46 at 55 W. 46th St., which had an asking rent of $100 per square foot. JLL does not count this property in the top 25 because, so far, it does not have a large clique of tenant hedge and financial firms.
Relocating and expanding from just 5,500 square feet at 444 Madison Ave., Soroban will now have the entire 32nd floor of 22,522 square feet.
Dan Madison and William Levitsky of Newmark Knight Frank represented the tenant.
Founded by Eric Mandelblatt in 2010, according to whalewisdom.com, the Soroban fund now has $11.6 billion in discretionary assets and $19 billion in securities.
A CBRE team of Peter Turchin, Christie Harle, James Ackerson, Sam Seiler and Cara Chayet represented owner SL Green Realty Corp. along with Steven Durels, David Kaufman and Paul Milunec in-house.
