With investment sales slowing, and the $1 billion-building sale fading, how does the Manhattan landlord know he’s still cock of the walk? When landlords size each other up, it’s usually over who can build the biggest tower. But in these times of record-smashing rents, it’s all about who can collect the biggest 15-year lease.
Between April and September a sampling of 88 “premium” towers saw average direct lease rents increase from $99.11 to $107.54 a square foot, according to the brokerage Cushman & Wakefield.
Now that the $100-a-foot deal is a given, it’s a horse race over who can get the priciest lease.
Richard LeFrak opened eyes this summer when he said he’d be asking for minimum taking rents of $125 to $140 a foot at his 35-year-old 40 West 57th Street. The line in the sand he drew was dramatic: It was only a year earlier that Nautica had signed a lease in the lower part of the tower at rents that were about three times less. No matter!
And apparently, it really doesn’t matter. After Labor Day, one source told The Observer that there were six or seven hedge funds and financial firms fighting for the space. And, according to the CB Richard Ellis broker Zach Freeman, the asking rents are “holding, if not tending upward.”
Score a point for Mr. LeFrak (who, by the way, also sold an outer-borough residential portfolio for $250 million before Memorial Day. Good summer!).
Then there’s the man with the new tower, One Bryant Park: Douglas Durst. He brought in the hedge fund Marathon Asset Management and the fashion designer Elie Tahari at taking rents at around $115 per square foot earlier this year.
With only two floors left for rent, how much has Mr. Durst decided to ask for?
Oh, $185 per foot, of course. And where are they with those negotiations? Totals are being discussed in a ballpark well above the Tahari and Marathon leases, according to a source.
Then there’s the man who could be well ahead of everyone: Sheldon Solow. A deal for the top floor at his 9 West 57th Street—praised by so many as the best tower in Manhattan—should reportedly exceed $225 per foot, easily a landmark deal. The rest of the tower, where about 500,000 square feet is opening up, according to Real Estate Weekly, should easily pass the $200 mark as well.
So with spaces drying up for development, forget the pretty tower—it’s time for new elevator shafts, big blocks of space and good renewals.