NEW YORK CITY-After peaking at $96 per square foot in the winter of 2008 and falling ever since, asking rents at Manhattan’s trophy office buildings are on their way back up, increasing from an average of $67.58 per square foot to $68.09 over a six-month period. So says Jones Lang LaSalle in its semiannual Skyline Review, which also notes that vacancy rates at these top-tier properties have tightened from 13.1% in December 2009 to 10.1% at the end of 2010.

“Since New York’s office market has reached bottom, activity is expected to strengthen in the near-term, with recovery beginning at the top end of the market,” says James Delmonte, VP and director of research for JLL’s New York office, in a release. “Average asking rents among Midtown’s trophy set of properties have moved higher in recent months. Several of the submarket’s top-end buildings have recorded asking rents north of $100 per square foot on some select spaces.” He adds, however, that while “landlords in trophy properties appear eager to raise asking rents,” it’s less clear whether there will be enough demand to push average trophy rents significantly higher in the near term.

The increases seen in these trophy offices occur as part of a broader pattern of improving fundamentals across Manhattan’s office submarkets, according to CB Richard Ellis. In Midtown, average asking rents vaulted up $2.15 to $57.97 per square foot at the end of February, in the highest single-month increase seen here since June 2007, CBRE says.

Overall, asking rents in Manhattan rose 83 cents year-over-year to $49.61 per square foot, says CBRE. Year-to-date leasing volume of 4.19 million square feet rose nearly 23% over the 3.41 million square feet in the first two months of ’10, while the YTD absorption rate of negative 750,000 square feet was an improvement over the negative 1.11 million square feet of the year prior.

JLL’s first-ever North American Skyline Review of trophy office properties, covering 21 markets, found positive absorption in 15 of those markets, with New York City, Denver, Charlotte and Toronto absorbing more than one million square feet each last year. Unsurprisingly, Manhattan was also a pacesetter on the investment sales side last year, as part of an upward trend that saw three times as many trophy properties trading across the 21 markets in ’10 compared to 2009.

Office sales in New York, though, outpaced the global and US markets in terms of recovery, JLL says. Last year’s $12.1 billion in New York transactions—including lower-echelon assets as well as trophy properties—represented a 245.7% increase over $3.5 billion in ‘09. JLL points to a pair of examples that offer evidence of pricing returning to near-peak levels: the well-known acquisition of 111 Eighth Ave. by Google for $1.77 billion and the sale of 434 Broadway for $41 million, the same price it fetched in 2007.  

The gains in pricing for Manhattan office assets may be old news already, and JLL cites Invesco’s recent buy of 1800 Larimer St. in Denver for a reported $213 million as a sign of things to come. “Due to intense competition in the leading gateway markets of New York City, Boston, Washington, DC and San Francisco, we believe investment allocation will widen to incorporate more geographies in 2011 and 2012, as we saw with the 1800 Larimer trade drawing intense competition,” says John Sikaitis, JLL’s Washington, DC-based SVP of research, in a release.