Manhattan Office Tenants Save Big at Pricey Towers as Concessions Mount

Plenty of high-end New York office buildings want rents above $100 a square foot. But is anyone actually paying that?


They say it never hurts to ask. But at Manhattan’s high-end buildings, high asking rents aren’t helping much. 

Landlords listed roughly 13.4 million square feet of Manhattan office space at asking rents above $100 per square foot in 2022, the most in a single year since 2016, according to CBRE (CBRE) data. The first quarter of 2023 saw 28 deals with starting rents of $100 per square foot or more, above the five-year quarterly average of 25 deals, though a 12.5 percent slip from the fourth quarter’s total.

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But, while the amount of high-priced space has risen, so have concessions. 

“Over the last 15 years for a new lease, the amount of free rent has more than doubled,” said Frank Wallach, executive managing director of research and business development at Colliers (CIGI)

Take a 30,000-square-foot, 10-year lease in a Class A building in 2008. A tenant might’ve gotten six months of free rent, said Wallach. In that same deal today, a company would score about 14 months of free rent. And concessions have outpaced rent growth in some parts of Manhattan.

“There are some buildings that are either brand new or have gone through a revitalization, so even offering very high concessions, net effectively, some of those deals are still ahead of where they were 15 years ago,” Wallach said. “But, on an overall basis, the concessions have increased at a faster rate than the rent.”

In Manhattan, the number of months of free rent an average tenant scored rose from 13 months pre-pandemic in 2019 to a peak of 17 months in 2022, before sinking slightly to 16 months as of April 1, 2023, according to CBRE. Tenant improvement allowances, or the amount of money a landlord gives a company to build out its offices, also peaked last year, rising to $147 per square foot on average before dipping slightly to $145 per square foot in the first quarter of 2023, according to CBRE data. It averaged $104 a square foot in 2019.

Those 2022 numbers represent the highest amount of free rent and tenant improvement allowances since 2011, according to CBRE data, which tracks direct deals that include concessions and are larger than 25,000 square feet and longer than 10 years. And discounts are having quite the impact on high-priced buildings.

“Concessions are crazy through the roof,” Scott Panzer, a broker and vice chairman at JLL (JLL), said. “There was a time where, inside a decade ago, it was only $80 a square foot for tenant improvement allowances. Now it’s north of $100-something a square foot. On buildings that are really stretching and trying to get the deals done, they’re getting as high as $165 to $170 a square foot, or more.”

In Midtown, Midtown South and Downtown Manhattan, the average tenant scored 17 months of free rent as of April this year, while tenant improvement allowances in the three areas varied at $148, $143 and $125 a square foot, respectively, according to CBRE.

Panzer said he hadn’t closed a single deal in the last few years without a concession package, and that while he couldn’t give specifics, tenants were scoring deals.

“I can tell you that they’re all out there getting these concessions,” Panzer said. 

The pandemic, and the subsequent shift to remote work for traditional office users, pushed landlords to offer souped-up amenities such as day cares, beehives, cafes and golf simulators to get tenants in the door. But there’s nothing like cold, hard cash to make a company sign a deal.

That upfront cash savings is showing up most in those Class A buildings with the higher asking rents and posher amenities, said Adam Henick, co-founder of Current Real Estate Advisors.

“We’re seeing heavy concessions throughout the market,” Henick said. “I’d say they are certainly heaviest in Class A because it’s a function of the level of rents that are being paid, the degree of the project and the actual build.”

Those concessions can bring rents at higher-
quality buildings, often populated by financial services tenants with deep pockets, down below $100 per square foot, though still higher than what they would pay at a Class B or C space, Michael Slattery, a research manager with CBRE’s Manhattan research department, said.

“Of around 49 buildings in Midtown and Midtown South where these high-end hedge funds, private equity firms and family offices congregate … we see tenant improvement allowances of about $149 and 14 months of free rent,” Slattery said. “Their taking rent, without those concessions, is about $113. So when you layer that in, you probably get down to the $80 to $90 range.”

Landlords are even willing to trade immediate rent for the promise of a long-term deal with a credible tenant down the line, either by holding space for a tenant or by offering significant discounts on rent, Henick said.

“I don’t want to use one brush to paint the whole picture, but I think for 10-year deals at Class A buildings where there are full buildouts occurring, owners are not cash-flow positive for at least two and a half or three years given the concession costs, and, in some cases it’s even higher,” Henick said.

Given the competitive market, tenants with the money for high-end buildings, and the trust of their would-be landlords, have the advantage in landing a cheap deal.

“Credit is king,” Marisha Clinton, Savills’ senior director of Northeast regional research, said. “If there is a high, good credit tenant looking to take space in your building, then, whether you’re a trophy building or not, we do see those landlords offering generous concessions in order to attract that tenant to their building and get them in there long-term.”

Still, every deal is unique. Larger tenants and those in a better financial position tend to score better deals, and landlords also offer additional benefits that might get a tenant to sign, Slattery said. The Durst Organization, for example, offers furnished, ready-to-go space at its trophy World Trade Center buildings for leases as short as 13 months, letting a firm test the space before signing a long-term deal. 

But, overall, concessions are up, and not just because of the pandemic, potential recession and all-around craziness of the office and debt markets right now. Concessions have also slowly risen as construction costs have gone up, making it more expensive to build out office interiors, said Wallach. Plus, a landlord may list a higher face rent, with plenty of concessions, to keep a property in line with the expectations of a lender who financed that building, Henrick added.

And, while concessions dropped slightly in the first quarter, they’ve remained high amid a shaky commercial real estate market, Clinton said.

“At the end of the day, everything boils back down to the economic uncertainty that’s taken hold in the environment,” Clinton said. “There has only been a modest amount of declines in the amount of [tenant improvement allowances] or free rent that has been offered. At the end of the day, concessions remain elevated across the Manhattan markets.”

The availability rate in Manhattan has also remained high, at around 16 percent in the first quarter. For trophy buildings, properties with the highest asking rents, top-notch amenities and great locations, the availability rate was as high as 24 percent in Midtown South in the first quarter of 2023. In Midtown, it was 16.5 percent, while Downtown posted a 13 percent availability rate. 

Availability could tighten into the year as fewer Class A buildings come online, said Slattery, who pegs the availability rate at the high end of the market at closer to 11.2 percent.

“New supply is what brings those new price points in,” Slattery said. “In the near term, there’s not much new supply that is going to be delivered. … It really drives home the point that there is tightening in this market.”

That tightening, however, also depends on companies to keep leasing high-end office space. Plenty of office tenants that have taken deals in high-quality properties have taken less room, not more.

Accounting firm KPMG cut more than 40 percent of its New York City office footprint in a relocation from three buildings to Brookfield Properties’ 2 Manhattan West. HSBC Bank USA will cut its New York City footprint roughly in half when it moves its headquarters to Tishman Speyer’s The Spiral

Those financial services firms are the companies leading the charge at high-priced buildings, as remote work, layoffs and a slowdown in venture capital funding hit the technology, media, advertising and information sectors, Clinton said. 

While Clinton said she lacked a “crystal ball” to see if leasing will continue at trophy buildings, she did note that the number of deals at those properties could shrink as the amount of available space declines, and as tenants consider the economic climate.

“There won’t be as much space available in trophy buildings, so the amount of leasing and size of leasing in these high-end buildings will potentially shrink,” Clinton said.  “A lot of that has to do with the looming recession as more companies are watching their bottom lines and still evaluating their return-to-office policies. All these things are coming into play in terms of tenants making the move to high-end trophy buildings.”  

Celia Young can be reached at