NYC Office Tenants Signed Record Number of Trophy Leases in 2023 Despite Slump

For companies hunting office space, it would seem they would be able to negotiate whatever price they'd like, given remote work, never-before-seen vacancy levels and desperate landlords.

But in New York City, one sector of the market is seeing new tenants pay extraordinary premiums for offices.

A record high of 192 leases starting at $100 per square foot were signed last year, according to a report released Monday by commercial brokerage JLL. That comprises 5.6 million square feet of space, accounting for a quarter of total leasing volume in Manhattan.

The pricey leases reveal that companies still believe that workers are still eager to go to the office, but only if developers give them reasons to leave their home. Most of the triple-digit, per-square-foot leases were for brand new and amenity-rich buildings.

“A theme [was] location matters, but what’s under the hood, in some cases, matters more,” said Cynthia Wasserberger, JLL vice chair and the author of the report.

Nearly half of the most expensive leases were for new construction or redevelopments. 

At the historic Seagram Building, owner RFR Holding spent $25 million during the pandemic to add a recreation complex that can be converted into a conference space, now known as “The Playground.” Formerly a parking garage, the space now features a multi-sport court, 22-foot-tall climbing wall, training equipment, fitness classes and stadium seating for 150 people. Last year, the building signed 12 triple-digit deals, the most of any other Manhattan building. 

Additionally, 12 tenants paid over $200 a square foot for nearly 200,000 square feet of office space.

SL Green’s One Vanderbilt, which celebrated the city’s first-ever office lease signed at over $300 a square foot in 2022, also claimed a top spot in 2023. The new high-end tower secured the year’s highest starting rent at $247 per square foot with AIMCO, as well as another high-end lease with Stone Ridge Asset Management, expected to be as much as $245 per square foot.

The financial services industry dominated the leasing game. Hedge funds, wealth managers and other financial institutions signed 80% of the most expensive leases last year. 

Wasserberger expects the trend to continue as landlords get increasingly creative with offerings. She pointed to 550 Madison Avenue, which was originally completed in 1984, but has more recently aimed to bring an at-home feeling to the office. It’s added a dining room, cafe and wine bar, outdoor garden and wellness space, in addition to library, screening and pool rooms for tenant use.

“Tenants look through a scrutinous lens,” Wasserberger said, explaining why companies sign such high-end leases. “They feel that they'll get some qualitative benefits, and that it'll be a draw to bring employees back to the office, which is really the bottom line of what most firms are still trying to accomplish.”