Or, as Ben Friedland, CB Richard Ellis’ go-to hedge fund broker, put it, “Even groups that are in a great financial position measure themselves against their peer groups.”
BUT COMPARATIVE bargain or not, in the larger, more reality-driven world, $100 a square foot, and its return, signals something. To Steve Morrows, who handles leasing for RFR Realty’s Seagram Building and Lever House, it signals the demise of that whole short-lived frugality thing.
“I believe that the whole concept of anti-luxury that we experienced in the early part of the recession is starting to wane,” Mr. Morrows said.
He would know. In the past month, Mr. Morrows has signed four tenants at 390 Park Avenue, the Lever House, at rents above $100 a square foot: Wellspring Capital, Thomas Weisel, Sanders Capital and Stone & Youngberg.
Mr. Morrows said he has also signed two new tenants at the Seagram Building for more than $100 a square foot (he wouldn’t reveal the tenants’ names, since the transactions are not yet complete).
The luxury momentum is rooted in the revival of the hedge fund leasing market. Following Lehman Brothers’ demise, hedge funds and boutique firms shed 2.3 million square feet of office space in midtown, according to Cynthia Wasserberger, a senior vice president at Jones Lang LaSalle who tracks the hedge fund market closely.
By August, fully 44 percent of that space had been leased, subleased, or taken off the market. More precisely, 26 percent (or 583,000 square feet) has since been leased (or has a lease pending), and 18 percent (408,000 square feet) has been taken off the market.
In the over-$100-a-square-foot market, the resurgence began with smaller firms, those owned by only one or two principals who wanted between 3,000 and 10,000 square feet. Because of their small size, these firms had fewer investors eagle-eyeing the bottom line.
But even that is beginning to change. Mr. Morrows has two leases in negotiations at the Seagram Building for space of more than 20,000 square feet in size.
So what, if anything, does it mean for the larger Manhattan office market that price-insensitive office users are once again signing expensive leases?
Some would argue not much, that we have the recession to thank for making spaces at some of these top-tier buildings available, and that it’s only natural for tenants to grab them up, no matter the price.
“You cannot replicate a tenancy at 390 Park,” Ms. Wasserberger said. “The minute you tell someone you’re at the Lever House, they will know you’re a very established, well-heeled firm. … The $100 price tag is almost incidental.”
True enough. Then again, maybe leasing up this top-tier space is the first step in some sort of, dare we utter the words, market recovery? One that births a Manhattan where $100 a foot seems a bargain?
As Mr. Emden pointed out, “The A market will always recover before the B and the C markets. And the A-plus market is certainly going to always recover first.”
drubinstein@observer.com
