NEW YORK CITY—After a slower leasing pace in 2016, leasing activity picked up notably in the first few weeks of 2017, according to JLL's latest hedge fund report.

Midtown Class A average asking rents increased just 1% year-over-year to $81.37 per square foot, compared to at least 3% annual growth between 2013 and 2016. Comparatively, the average Midtown trophy asking rent is currently $99.53, down from $101.13 per square foot in Q1 2016.

Along with slowed growth in Midtown Class A asking rents, the Midtown Class A vacancy rate remains flat at 11.1%. The impact of increasing vacancy rates on asking rents was most notable in the top-tier buildings, with Midtown trophy asking rents decreasing 1.5% year-over-year and the vacancy rate increasing from 7.7% to 8.9%.

Despite the rise in vacancy rates, particularly for Class A buildings, landlords have succeeded in maintaining the high face rents by offering increasingly robust concession packages. Triple-digit tenant improvement allowance offerings or turnkey build-outs at the landlord's cost are appearing much more frequently.

Historically, tower floors command a significant premium over lower floor space, the report notes. Views and light often are appreciably better on tower floors , they typically have terraces or outdoor space and may feature above-standard ceiling heights.

Tower floor space in Midtown Class A buildings has generated a 35% premium in rents over base floor offerings over the past five years, JLL states. In addition, trophy space rent outperforms Class A space by a significant margin. There's a 9.8% increase for Midtown trophy space over Midtown Class A tower floors and a 16.8% increase for Midtown trophy space tower floors over Midtown Class A tower floors

Generally, due to the relative dearth of tower floor trophy space—which has just a 4.1% vacancy rate—landlords have significantly more leverage on commanding higher rents and often will have competing demand for units that are in short supply, JLL reveals in its latest research.

Historically, the report continues, landlords tend to have more patience and tolerance to wait to procure stronger rents for tower floor space, particularly since it often will set a high water mark for rental achievements in an asset.

NEW YORK CITY—After a slower leasing pace in 2016, leasing activity picked up notably in the first few weeks of 2017, according to JLL's latest hedge fund report.

Instant Insights /

JLL: Lack of Trophy Tower Space Gives Landlords Leverage

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