As firms compete for luxury office space, it’s feast or famine for building owners

It’s a tale of two cities. While ultra-luxury office towers in hot spots are seeing massive rents of up to $300 per square foot, side street buildings are lucky to rent for a tenth of those prices. On average, asking rents in Manhattan are roughly $77 a foot, according to CBRE, but many basic office buildings fetch as little as $40.

“Momentum is only going one way,” said CBRE’s Ben Friedland. “Financial firms are looking for every possible advantage and one is working together. So the mandate is to bring the groups back to the office. This pent-up demand is coming to the market.â€

This request is for larger offices on higher floors. So instead of taking up two 20,000-square-foot floors, companies are leasing 40,000 square feet, Friedland said: “We’re seeing fewer companies taking an adjoining floor, and instead, they prefer to be on one floor bigger.”

So many ground-level trophy offices are now leased that 80% of available space in Manhattan is now on the lower floors, according to Benjamin Bass of JLL. Adding to the pressure, large tenants with leases expiring between 2030 and 2032 are now exploring the market.

“No one is developing any new products right now and it’s squeezing the market,” added Bill Elder of RXR, a major property owner. “There is a lot in the middle of LOI [letters of intent] or rentals and others are just starting to look. The market will pull a little and create a little frenzy.â€

At Vornado and Related’s 85 Tenth Ave., Google just renovated 300,000 square feet. At the same time, I am putting a similar amount on a short sublease at 345 Hudson St. while covering its occupation along the West Side Expressway and the new 550 Washington St. headquarters.

Luxury fashion conglomerate LVMH has already leased 150,000 square feet at 550 Madison Ave. Now it’s gobbling up another 150,000 square feet in the former IBM building at 590 Madison Ave. The building, which connects to a stunning trapezoidal atrium shared with Trump Tower, is being updated with a new amenity floor.

IBM recently decamped to new 270,000-square-foot offices at SL Green’s One Madison. Designed by Gensler, IBM’s massive 90,000-square-foot floors at the base of the structure are divided into “neighborhoods” for groups of about 25 to 30 people with outdoor spaces. There are sit/stand desks, cafe-like spaces and lots of nooks and crannies – making each area feel like a smaller workplace.

One Madison was also reconfigured with expansive floor-to-ceiling windows and outdoor terraces and features a new Chelsea Fitness on the ground floor and multiple distributed food options designed by David Rockwell for chef Daniel Boulud.

Back in the Plaza District, Citadel will become the anchor and may eventually own the new 350 Park Ave. after being destroyed and rebuilt by Vornado and Rudin. Meanwhile, it is negotiating to move into several hundred thousand square feet at the renovated 660 Fifth Ave in Brookfield.

The inability to attract new graduates to centers in Connecticut and New Jersey is also adding to market pressure. It’s forcing companies to rethink their locations and even double down.

“It’s entrepreneurship and private equity and high net worth,” says Brandon Charnas of Current Real Estate Advisors of the demand for trophy offices. “Such firms generally target Soho and the Meatpacking areas as management and junior staff are usually not tied to partners or families and want to be where the action is.”

For example, hedge fund giant Bridgewater, now headquartered in Westport, Conn., has been scouting glass and steel sites in Manhattan for a satellite office and is expected to lease the new 34,687-square-foot apartment and terrace. the top two floors of the 710,000-square-foot 295 Fifth Ave. That building has been completely reinvented by Tribeca Investment Group and is now ready for move-in by firms like Quinn Emanuel.

Meanwhile, financial firm Jane Street is close to expanding to 1 million square feet at Brookfield Place, while American Express may jump across West Street to become the anchor tenant for Larry Silverstein’s 2 World Trade Center. Moody’s 20-year lease at 7 World Trade for 600,000 square feet expires in 2027, and brokers say it is currently weighing options.

In a move from Midtown, represented by Friedland and team, Senator Investment Group moved from 510 Madison Ave. at 12,455 square feet on the 21st floor of the 22-story boutique Zero Irving, developed by RAL Properties on East 14th Street in Midtown South — priced at a hefty $170 a foot. The building has a roof deck for all tenants at the top, while its base includes Civic Hall workforce development and digital skills training and a large food hall.

“Tenants saw it as an added benefit,” said Spencer Levine of RAL, the developer repped by JLL.

“It’s all about speed. Anyone who can offer a faster moving solution is more attractive to tenants.â€

Sarah McCann of Vocom

To lure tenants who want to move quickly, many properties are also pre-construction offices—typically 10,000 square feet or less—and sometimes offer furniture. That’s because smaller renters and tech industry “vest bros” don’t have a real estate expert at home and want the instant gratification of renting and moving in as easily and quickly as possible.

“For the vast majority of tenants, [leasing and moving] it’s a distraction and a headache,” said Jed Walentas, director of Two Trees and chairman of the Real Estate Board of New York.

At the redeveloped Domino Refinery on the Brooklyn waterfront, Walentas is now building eight or nine pre-fab offices on the lower floors, as they were caught asking rents at $70 a foot. He is also completing and furnishing a 30,000 pre-built on the full 12th floor, with an asking rent of $90 per foot.

“It makes the process much easier and streamlines the transaction,” Walentas said.

In the Empire State Building, ownership (ESRT) has installed glass walls, with the option to add wiring, all furniture and will even help the company move. That’s something consulting firm Capco took advantage of when it leased a 25,000-square-foot pre-built office on the 68th floor.

“People pay more for every additional benefit,” said ESRT chief executive Anthony Malkin.

“It’s all about speed,” added Vocom’s Sarah McCann, who oversees installations for clients including ESRT. “Anyone who can offer a faster transfer solution is more attractive to tenants.”

Meanwhile, nonprofits may not have the budget for trophy offices atop amenitized towers, but the tax breaks put them in the sweet spot as tenants.

After the Archdiocese of New York sells 1011 First Ave. office building through CBRE, the church will move its offices into a 142,000-square-foot space at the base of the Feil Organization’s 24-story former Look building at 488 Madison Ave. where a retail store already operates in front of St. Patrick’s Cathedral.

Since the new “synthetic” 30-year lease is considered a “sale,” the church won’t have to pay city real estate taxes and has a bargain rent of $45 a foot.

“While everyone may want to be in a Class A building with 360 views, they can’t all afford triple-digit rents,” said Brian Feil, principal of the Feil Organization, noting that the building’s formerly “Look” was refinanced. for $100 million and is now 98% occupied. “We are low leverage and have the ability to transact and meet the market.”