THE CHANGES HAVE ALREADY paid dividends.
“I think because we cater to the smaller user, we’re actually benefiting from all the downsizing that’s occurring out there in the marketplace,” said Jill Burrowes, 370 Lexington’s on-site broker. She was sitting in the conference room of a 1,600-square-foot unit that was recently vacated, ahead of schedule, by a defunct advertising agency. “All these large firms that are downsizing or are paying $90-per-square-foot rent with views overlooking Central Park and are now more concentrated on self-preservation, when they see a quality building and we’re charging $45 or $50, it’s just a more logical process.”
Sherwood has leased a total of 46,000 square feet, the majority of which are new leases, since buying the property in September 2008. The asking rents are in the mid-$50s, but Ms. Burrowes said deals are closing in the mid-$40s.
On Sept. 28, they closed their 22nd lease of the past 12 months. The Zacchia Law Group P.C. will in December relocate from 441 Lexington Avenue to a 1,327-square-foot unit on, oddly enough, the 22nd floor. Other new leases signed since last September include the legal department of Napster—yes, that one—for 1,800 square feet on the 19th floor in December; Heineken Americas on the 24th floor; and the hedge fund service provider Meridian Fund Services, which renewed and nearly doubled its size by expanding into an additional 1,542 square feet of prebuilt space, for a total of 4,890 square feet.
The occupancy rate is currently 93 percent, but Mr. Katz, Sherwood’s CEO, has noticed that tenants who waited on the sidelines for the leasing market to bottom out last year have become increasingly anxious to close long-term deals before prices rebound.
“Brokers are telling their clients we’ve hit bottom and now there is a sense that you’ve got to move now because things might be much more expensive a year from now,” he said. “The way that deals are happening now are a little more favorable to the landlord. I hate to get ahead of things and say it’s a landlord’s market, but things are shifting that way.”