For at least the third time this year, there is a new record holder for the most expensive office lease in New York City history.
Castle Hook Partners agreed to pay $375 per SF for the two-story penthouse above Related Cos.’ upcoming trophy office tower at 625 Madison Ave., according to JLL. The hedge fund is one of 11 companies that have agreed to pay more than $300 per SF in rent for Manhattan office space until now in 2026, a threshold almost unprecedented until this year.
Courtesy of Related Cos.
A Related’s 625 Madison Ave office tower trophy
If not for Castle Hook, NYC rent records would still have fallen last month. Sentinel Capital Partners paid $340 per SF, according to JLL, to expand offices at SL Green’s One Vanderbilt by 7K SF on the 54th floor.
One Vanderbilt, a 1,401-foot supertall connected to Grand Central Terminal opening in 2020, quickly held the record for the most expensive NYC lease in March when Nvidia-backed Nscale paid $320 per SF for 7,204 SF, also on the 54th floor. A few days later, Soloviev Group announced a $327.50-per-SF lease at 9 W. 57th St.
Castle Hook plans to move from BXP’s General Motors Building at 767 Fifth Ave when 625 Madison delivers in 2029 and is expected to pay more than $21M per year in rent, Financial Times reported.
Castle Hook and Related did not respond Bisnowrequest for comment.
Leases that have been in a frenzy over the amount of available office space in Manhattan, especially in the high end of the market, have disappeared. Cup vacancy was 4.9% at the end of the third quarter, according to JLL.
“It’s a scarcity problem,” said JLL Vice Chairman Evan Margolin. “Tenants are willing to pay until they are in the best building.”
Asking rents in class-A buildings reached an all-time high in Q3 at $85.45 per SF, according to Colliers, but even that doesn’t tell the whole story, Margolin said.
Developments like Related’s 625 Madison and 70 Hudson Yards, Extell’s 570 Fifth Ave., SL Green’s 346 Madison Ave. and BXP’s 343 Madison Ave.. do not factor into the average asking rent calculations because they do not exist. That leads to sticker shock for tenants shopping for space and expecting rents in the double digits per SF.
After years of industry professionals touting “flight to quality” in the office market when most buildings suffer vacancies, the dynamic has begun to flip.
Companies in need of Midtown space now find themselves having to swallow less-than-ideal conditions to accommodate their teams.
Kirkland & Ellis, whose main office is at 601 Lexington Ave., expanded its foothold in the store at 900 Third Ave. by 52K SF. Evercore took the space at 599 Lexington Ave because its headquarters in Park Avenue Plaza ran out of room to grow, Margolin said.
“They needed more space, so they had no choice,” Margolin said. “That’s a phenomenon we’re seeing now.”
An artificial intelligence company is creating a similar phenomenon in Midtown South, making companies that need space less aggressive. Anthropic last quarter leased all 466K SF of 330 Hudson St.
“There are a lot of these companies taking up a lot of space. They are taking up large chunks of space and growing very quickly,” Margolin said. “That creates a challenge for many other tenants.”
No relief is in sight, though there is now nearly 10M SF of office space under construction in Manhattan, up from 7.7M SF at the end of June, according to JLL.
All of the damaged buildings have anchor tenants, and delivery is several years away. The next to break ground could be Tishman Speyer’s 99 Hudson Blvd., where Sony is in talks about what can be nearly half the building, Commercial Observer reported.
“Now it makes sense to get this office building off the ground,” Margolin said. “It doesn’t happen quickly.”