More high-end office space in Manhattan is getting $100 per square foot, says a new CBRE report.
“Top quality assets—including new or renovated buildings with abundant amenities, modern building systems and easy access to public transportation—have demanded triple digit rents during the pandemic,” CBRE is asserting.
The total square footage in Manhattan’s $100 market is still below pre-pandemic levels on a deal count basis, the firm conceded but it pointed out the number of $100 deals was up 114% from 2020 and 18% above the five-year historical average.
Another indication of strength, CBRE noted, is that 2021 saw the most transactions start at $150-plus since 2016 as well as the most transactions at $200 per square foot and above.
Financial tenants accounted for the largest share of $100 per square foot space at 45% of total square footage and 69% of the total transaction count last year. Media and entertainment tenants claimed 18% of deal square footage and 3% of the deal count.
Technology businesses also were major tenants in the price range, taking 7% of $100 deal leasing and 4% of the deal count.
The increased occupancy of $100 rents has been accompanied by increased availability with new construction and renovation helping to raise spaces with asking prices at that level by more than 250% since 2016 to 11.1 million square feet as of December 30.
There is weakness within the resurgence, CBRE concedes, as landlords are having to offer considerable tenant improvement allowances and free rent packages to get the $100 per square foot and above deals. The firm notes the average tenant improvement value has increased by 102% amongst $100 deals from $76 per square foot to $154 since 2016 while free rent has increased 23% from 13 months to 16 months.
In some cases, tenants are paying more than the asking price.
“Even as much of the market lowers its lease rates, landlords with trophy assets are pricing their space at higher levels,” CBRE says it is finding.