HBK Investments is giving up some of the space that it leased in One Bryant Park last summer. The Dallas based hedge fund has decided to terminate its commitment for roughly a third of the towering building’s 40th floor, a 36,000 square foot space that it committed to for a whopping $135 per square foot in June 2007.
“It’s official, HBK has terminated their lease with respect to approximately 12,000 square feet,” said Eric Engelhardt, a vice president of leasing at the Durst Organization, the building’s developer and owner. “They will be keeping a little over 24,000 square feet.”
The Dursts, one of New York City’s oldest and most successful real estate families, is building the tower in partnership with Bank of America, who has agreed to lease about 1.6 million square feet of the tower’s 2.1 million square feet.
Coveted as one of only a few brand new trophy buildings being constructed in the city, with amenities and a prime location next to Bryant Park, the building’s remaining space had been quickly filled for some of the city’s highest rents. Before HBK’s termination, only 30,000 square feet on the 37th floor remained available.
Engelhardt said that the Durst Organization saw the opening as an opportunity to yield higher rents and that the firm’s leasing team will now ask $185 per square foot for the space, a staggering $50 per square foot higher than what HBK had agreed to pay. The developer is asking for the same rent on 37 and is open to partitioning the spaces into subunits in order to cater to smaller tenants.
“Originally we were marketing the building on a full floor basis only but with respect to both floors 40 and 37, we would divide down,” Engelhardt said. “There is a greater universe of smaller tenants looking for high end space.”
The Durst Organization’s new strategy for the few remaining pockets of space in the tower will cater to what has continued to be one of the few sweet spots in the leasing market.
Economic tumult like subprime write downs and the credit crunch have hampered Manhattan’s largest space using industry, the financial sector, and the leasing market overall has slowed. But boutique spaces in high-end buildings are still finding deep-pocketed takers who have expertly steered through the current problems or are not as directly linked to the downturn as jumbo-sized tenants and spend big on top shelf offices.
In recent weeks, the hedge fund Harbinger Capital paid close to $180 per square foot for 20,000 square feet in 450 Park Avenue. Another investment fund, Clarium, just did a deal near $100 per square foot to take 30,000 square feet in the Grace Building, which is close to One Bryant Park. Both funds have netted soaring returns so far this year despite the troubled markets.
But there have been signs of distress in the high end leasing market as well. After seeing its earnings get battered in the fourth quarter of 2007, iStar Financial did an about-face on an exorbitant 100,000 square foot lease it took in 1095 Avenue of the Americas, which is directly next door to One Bryant Park. iStar, which paid $140 per square foot to take the space, is now offering it for sublease.
Engelhardt said that HBK's decision to give the portion of its space back was motivated by the firm’s plan to keep more operations in Dallas.
“The space they are giving back to us was not about downsizing, it was extra space for future growth,” Engelhardt said. “They decided to grow their Texas office a little more than New York, so therefore they didn’t need the growth space here.”