Shine On, You Crazy Trophy Towers! Hedge Funds, Law Firms Driving Up Rents

How do we know we’re living in a second Gilded Age? Even as the economy tanks and a record number of small businesses declare bankruptcy, asking rents in the city’s trophy towers continue to float higher and higher into the stratosphere, untethered by such petty concerns as price, according to Jones Lang LaSalle’s until now unreleased 2008 Skyline Review.

In these so-called trophy buildings—midtown towers like One Bryant Park and the GM Building—average asking rents increased 3 percent from the fall of 2007, reaching $122.93 a square foot.

In the past year, asking rents in these upper-crust towers have increased 18 percent from $104.14 a square foot.

And that’s a mere pittance compared to the choicest of the choice spaces in the choicest of the choice buildings—like the 37th floor of One Bryant Park.

In such trophy locations, average asking rents hit $191 a square foot, a 6.1 percent increase from the fall and a 27.3 percent increase from the spring of 2007.

James Delmonte, vice president and director of research for Jones Lang LaSalle’s New York region, said most of the groups willing to pay such seemingly outrageous sums are hedge funds (thank you, distressed debt) and legal-services firms (thank you, human nature).

Meanwhile, in the lower reaches of Manhattan, trophy building rents increased 2.7 percent from the fall to $70.80 a square foot and 6.2 percent from the spring.

Mark Weiss, an executive vice president with Newmark Knight Frank, said we should approach such statistics with some caution: “There’s an aberration in the statistics, because the space that is turning over for the most part is the very high-end space, which has bloated asking prices.”

Fair enough.

Meanwhile, vacancy rates rose, but again not as quickly as in regular-old Class A properties. In midtown trophies, according to Jones Lang LaSalle, the average vacancy rate was 6.7 percent in April, up from 4.7 percent in October. In midtown Class A buildings overall, the average vacancy in April was 8.1 percent, up from 7.2 percent in October.

Mr. Delmonte said we needn’t start stressing about vacancy rates until they pass 9 percent, when, traditionally, we would begin to see a “downward pressure on rents.”

Not that the tenants in this particular niche market would bat a monocled eye.

drubinstein@observer.com Shine On, You Crazy Trophy Towers! Hedge Funds, Law Firms Driving Up Rents