NEW YORK CITY—Most of the gains in Manhattan’s rental rates over the past year can be attributed to increases in rates for the city’s trophy buildings, according to Jones Lang LaSalle's Spring 2012 Skyline Review for New York. Starting rents in some of New York’s trophy product surpassed $175 per sq. ft. for the first time since 2008.
The Plaza District, typically the highest-priced submarket in Manhattan, posted average asking rental rates of $95.39 per sq. ft. for trophy space in February 2012, a 30.3 percent increase in asking rents from the $73.32 per sq. ft. recorded at the bottom of the market in 2010. The Spring 2012 Skyline Review noted, however, that the city continues to see a wide disparity in pricing. The Midtown trophy set saw more modest average asking rental rates of $89.12 per sq. ft. in February 2012, a boost of 26 percent from rates of $72.11 per sq. ft. at the bottom of the market. Downtown trophy asking rents have grown just 10.7 percent over the same time period to $51.56 per sq. ft., representing a more than 40 percent discount to the Plaza District.
Nationally, with just four regional markets adding minimal new developments, leasing demands continue to outpace supply, allowing landlords to scale back tenant improvement allowances by five percent while increasing rents by nearly three percent at top office properties. The annual North American Skyline Review from Jones Lang LaSalle also reports that heightened investor interest for this type of product caused activity to expand beyond gateways into secondary markets.
“Vacancy levels continued to drop nationally in trophy and class-A properties in 2011; yet, with the exception of markets spurred by technology, energy and healthcare demands, they have a way to go before witnessing the lows of 2006,” said John Sikaitis, director of U.S. Office Research. “However, net-effective rents in the U.S. increased with some markets witnessing double-digit growth. With limited supply in the pipeline, we anticipate to see this upsurge trend in rents continue.”