T
rophy offices are in high demand, with brokers warning that tenants need to act fast or risk losing out on prime space. Adam Henick of Current Real Estate Advisors recalled a recent instance where a boutique office building at 360 Bowery was snapped up by Chobani, leaving no room for other potential tenants.
The Plaza District, which includes Fifth, Madison, and Park avenues north of Grand Central, is particularly hot, with leasing activity reaching 3.26 million square feet in the last quarter of 2024. Citadel's massive lease at Brookfield's 660 Fifth Ave. has paved the way for a major redevelopment project that will add 1.8 million square feet to the area.
With little new development on the horizon and over 100 million square feet of "zombie" properties unable to secure deals, the remaining available space is being gobbled up quickly. JLL reported that overall leasing activity hit 30.2 million square feet in 2024, with a record 28 deals signed above $200 per foot.
Mark Weiss of Cushman & Wakefield noted that the market has shifted from weak to tight within a year, giving premium buildings and locations significant pricing power. The most recent deals at Lever House have all been signed above $200 per foot, outpacing the average trophy rent of $150 per foot.
Market rents for investors are being underwritten 20-30% higher since the pandemic, particularly around Park Avenue and near Grand Central Terminal. Scott Rechler of RXR attributed this trend to a "flight to quality," with tenants seeking out high-end spaces in desirable neighborhoods.
The Plaza District is expected to remain one of the tightest submarkets, with few new developments on the horizon. Other projects that need anchor tenants before securing construction financing include BXP's 347 Madison Ave. and RXR's Commodore Tower at 175 Park Ave.
As companies seek out premium space, demand will likely broaden to other submarkets, including downtown areas where rents are lower. Howard Fiddle of CBRE predicted that tenants will make fiscally prudent leaps to downtown, where Colliers reports an average asking rent of $57.03 per foot.
In Hudson Square, Disney's new digs are expected to boost the area's restaurants and retailers, while nearby projects like One Grand and 345 Hudson St. offer unique amenities and opportunities for growth. In Midtown, Paramount Group's 1633 Broadway offers floorplates of 40,000-50,000 square feet and rents from the $60s to $80s per foot.
Unique hospitality-like amenities are creating bidding wars for offices at 10 Grand Central, with Craig Deitelzweig of Marx Realty reporting four groups vying for the same space. Tenants want amazing spaces that make going to work enjoyable, and if a building doesn't offer something special, it won't lease.
