Midtown Landlords Jack Up Concessions To Build Cool Offices For Tenants

450 Park Ave. In Midtown Manhattan

As the West Side of Manhattan continues to rise in stature, both physically and in terms of office tenants, Midtown landlords are paying more money than ever to keep up.

A JLL study has found that tenant improvement allowances and free rent offers in Midtown are far higher now than they were at the pre-recession office leasing peak in 2008, even though asking rents are hovering just below 2008 levels, the Wall Street Journal reports. Increasingly, landlords are spending on such improvements up front to pre-build amenitized office spaces as a way of attracting tenants.

Midtown landlords are offering an average of $87 per SF of tenant improvements in 2017, almost triple the $30 average in 2008. While Hudson Yards and its neighbors have made headlines with notable anchor tenant signings, the increase in concessions is largely driven by smaller tenants who require about 10K SF, according to JLL.

Such tenants want quicker move-ins and more attractive spaces, in part influenced by WeWork's popularity among the growing sector of technology and information companies, Tribeca Associates founder Bill Brodsky told the WSJ. Accommodating such demands keeps leasing speed up and rents high, according to Boston Properties Senior Vice President Andy Levin.

In its report, JLL highlighted 450 Park Ave. among 12 Midtown buildings offering pre-built office space. The building is owned by Oxford Properties Group, but tenant HRG Group is offering a sublease of the entire 29th floor for $130 per SF. The 10,778 SF space has been outfitted with 10 offices, a boardroom, a conference room, three phone rooms and an open area with 34 trading desks.

According to Savills Studley, Manhattan landlords have increased spending on tenant allowances by 14% from 2015 to this year, as the third-quarter vacancy rate rose 0.1% from 2016 to this year. With the number of tenants ready to move to Hudson Yards or similarly luxurious new construction in the Financial District in the coming two years, vacancy is expected to rise further, and tenant improvements have become a go-to weapon for Midtown offices to keep pace.

Continue reading this story with a free account

Log in or register
Sign up for more articles like this
Subscribe to Bisnow's New York Newsletters
Related Stories

From Bankruptcy To $400M Buying Spree: Michael Shah's Rapid Comeback

Pace Of NYC Housing Construction Plunges As Developers Play Small Ball

Cross Ocean Partners, Fuller Realty Acquire 829K SF Houston Office Campus

NYC Office Investor Warns It Could Go Under As Defaults Pile Up

Deutsche Bank Takes 5 Floors At Oaktree And Quadrant's Canary Wharf Scheme

Coconut Grove Office Flipped For $15M Gain After One Year

D.C.'s Office Market Is Getting A Makeover

Chetrit Group 'Being Dissolved' As Family Turmoil Spirals

Oxford Properties Pays $435M For Boston Office Tower, Eyes More Deals

Century 21 Retail Redevelopment Advances With New Financing, Leases: The N.Y. Deal Sheet

Judge Rules FBI Can't Scrap Maryland Headquarters Plan

EXCLUSIVE: Opal Holdings' Former 700K SF Suburban Chicago Office Campus Hits The Market