NEW YORK CITY-According to a recent report by Jones Lang LaSalle regarding tower trends, despite the widely speculated corporate fear factor of leasing tower floors after 9/11, the numbers show something entirely different. Demand for high-quality space has driven record pricing across Manhattan, particularly for prestigious space at the 30th floor and higher. The report discusses the significant premium that tower floors command–based on analysis of more than 2,500 transactions–and reveals that since 2004, taking rents on tower floors average 26% higher than market.

James Delmonte, VP and director of research at JLL, tells that directly after 9/11 there was a slowdown for tower leasing. “When we first started looking at the data and going through the numbers roughly two months ago for this report, although we knew there would be a premium,” he explains, “we were surprised at how high it actually was.”

CB Richard Ellis’ research numbers also show that the demand is there. The company tells that the average asking rent in midtown is $81.34 per sf. As far as Midtown tower floors rents go: rent for the 32nd and 33rd floor at 1095 Avenue of the Americas goes for $150 per sf; the 47th floor at 1 Bryant Park fetches $185; and 745 Fifth Ave. gets $160 for the 30th floor. For Downtown, the average asking rent is $46.37 per sf; however, 32 Old Slip fetches $75 per sf for the 34th through 36th floor and 17 State St. gets $75 per sf. According to Silverstein Properties website, 7 World Trade Center’s rate per sf for the 46th through 50th floor is $75 per sf.

According to JLL, as of the end of Q2 this year, the average taking rent was $63.75 per sf compared to $86.36 per sf for tower floors. While asking rents and taking rents for tower floors have increased to record-highs, the average premium has similarly risen over the real estate cycle. The report noted that in some Midtown pre-eminent addresses, starting rents are getting as high as $150 per sf. As of the end of the Q2 ’07, there were 38 deals completed, more than half of which were in tower floors, with starting rents in excess of $100 per sf compared to 14 for all of 2004 and 18 in 2005.

Delmonte tells that the reasoning behind the numbers is that resurgence of the financial sector has propelled activity. “Hedge funds in particular have flourished over the last several years and have a considerable impact on pricing,” he says. “Since there are more insensitive to pricing and are a little more flexible, they typically locate in high-end office buildings.”

The report explained that financial services are the largest leasing industry in tower floors, accounting for over 50% of total activity in 2006. Legal service firms follow, comprising nearly one-quarter of tower floor leases.

Delmonte believes that tower floors will continue to garner a premium over market, especially due to the current supply constraint. The overall vacancy rate for class A space in Manhattan dipped to 7% at the close of Q2, however it is only 2.5% for tower floors. The report concludes that “the low tower floor vacancy rate coupled with unabated demand all buy guarantees sky-high rents for sky-high spaces.”

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