T
he Manhattan office market is experiencing a tale of two cities, with luxury office towers commanding massive rents while basic buildings struggle to fill space. According to CBRE, Manhattan's average asking rent is around $77 per square foot, but many basic offices are getting just $40. The demand for larger spaces on higher floors is driving this trend, with companies opting for 40,000-square-foot leases instead of two smaller ones.

    Ben Friedland of CBRE notes that the momentum in the market is one-way, driven by financial firms seeking every advantage and a return to the office. This pent-up demand is fueling the market, with large tenants exploring options as their leases expire between 2030 and 2032. The lack of new development is exacerbating the issue, creating a tight market that will likely lead to a frenzy.

    Luxury fashion conglomerate LVMH has leased 300,000 square feet at 550 Madison Ave., while Google renewed 300,000 square feet at 85 Tenth Ave. and put up a similar amount for a short sublease at 345 Hudson St. IBM recently moved into new offices at One Madison in Midtown South, designed by Gensler with features like sit/stand desks and outdoor spaces.

    The inability to attract college graduates to outposts in Connecticut and New Jersey is also driving demand for trophy offices in Manhattan. Hedge fund Bridgewater has been seeking a satellite office in Manhattan, while financial firm Jane Street is close to expanding to 1 million square feet at Brookfield Place. American Express may become the anchor tenant for Larry Silverstein's 2 World Trade Center.

    To lure tenants who want fast move-ins, properties are pre-building offices and sometimes providing furniture. This trend is driven by smaller tenants and tech companies that don't have in-house real estate experts and want instant gratification. At the Empire State Building, the ownership has installed glass walls with options for wiring and furniture, while at the Refinery at Domino on the Brooklyn waterfront, Two Trees is constructing pre-built offices.

    Non-profits may not be able to afford trophy offices, but tax breaks put them in a sweet position as tenants. The Archdiocese of New York will move its offices to a 142,000-square-foot space in the base of the Feil Organization's former Look Building at 488 Madison Ave., with a bargain rent of $45 per foot due to a "synthetic" lease that avoids city real estate taxes.