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As published by The Real Deal in “Is the “doom loop” in commercial real estate real?”, CompStak is pleased to present the 10 most valuable office leases inked in Manhattan in 2023. With this article, CompStak concluded its fifth consecutive year of ranking Manhattan’s top 10 most valuable office lease deals, which continued to showcase notable changes in the office market during this transitional period spanning 2019 through 2023.

Among the most notable findings for 2023’s top deals:

  • The Park Avenue submarket captured four of the top 10, as most valuable deal activity shifted east from last year’s ranked locations;
  • Law firms also accounted for four out of the top 10 ranked deals in this year’s list, marking the largest share since this list was initiated in 2019;
  • Each of the top ten deals was inked in existing construction marking a contrast with prior years that featured leases in new or recently majorly renovated buildings;
  • Paul, Weiss, Rifkind, Wharton & Garrison’s 765,931-square-foot lease ranked as the second most valuable deal completed in Manhattan and held the distinction of being the largest deal by size in both New York City and the nation overall in 2023;
  • A triple-digit work value average among the top ten deals prevailed for the fourth consecutive year.

Here’s a look back at everything CompStak has uncovered in the last 5 years.

Total Top 10 Deal Value Fell Slightly from 2022’s Level

2023’s total deal value across the top ten most valuable deals fell slightly from 2022’s level while still surpassing the totals reached in 2020 and 2021. This minor drop in total value is notable because 2023’s top ten ranking yielded zero deals in new construction or majorly renovated properties for the first time since this list has been compiled (2019). Total lease value was boosted by long term transactions and two leases in trophy buildings. Overall, Davis Polk & Wardell’s 710,000-square-foot renewal and expansion at 450 Lexington Avenue captured the most valuable deal at $1.5 billion. Another law firm, Paul, Weiss, Rifkind, Wharton & Garrison, ranked a close second with a lease value of $1.46 billion.

Fewer $100+ Per Square Foot Deals in 2023’s List Yielded Drop in Starting Rent Average 

Total valuation for the top ten deals decreased from 2022 to 2023. Similarly, a three-year upward trend in the average starting rent and number of deals of $100 per square foot or more was broken as they dropped to their lowest level in more than four years, according to CompStak data. From 2022 to 2023, the average starting rent (weighted by transaction size) among the top ten deals decreased from $104.23/SF to $77.17/SF, a 26% year-over-year decrease. This steep decline is due to a drop in the number of top 10 deals with $100+ starting rents from a total of seven in 2022 to just one in 2023. PJT Partners inked the highest starting rent of any deal in 2023 with its renewal and expansion to 270,000 square feet at 280 Park Avenue in Manhattan’s Park Avenue submarket for another 16 years. The financial firm’s deal began in the mid-$120s, whereas KKR’s sublease at 30 Hudson Yards took the lead last year with a deal in the low $170s. 

A Triple-Digit Work Value Average Prevailed for the Fourth Consecutive Year

Landlords capturing the top ten most valuable transactions of 2023 continued to offer a higher average work value and free rent period than in 2019. The average work value (weighted by transaction size) yielded a small year-over-year bump in 2023, while the average free months posted a minor decline, according to CompStak data. This drop in free months awarded could be partially attributed to a larger share of the top ten deals going to renewals than in 2022. Last year, just two of the top deals included renewals or extensions, while this year that figure jumped to six of the top ten. Meanwhile, the average free months declined 14.8% to 13.7 months in 2023. The tenant in the second most valuable deal of 2023, Paul, Weiss, Rifkind, Wharton & Garrison, secured the longest free rent period.

In 2023, the average work value remained in the triple digits for the fourth consecutive year, topping $137/SF, reflecting a 1.16% year-over-year increase. The transaction involving the greatest average work value was consequently also the most valuable deal on CompStak’s list–Davis Polk & Wardwell’s lease for 710,000 square feet of 450 Lexington Avenue.

Average Transaction Size Increased for the Second Consecutive Year Among Top 10 Manhattan Deals by Value

While the average lease term dipped slightly year over year to just under 18 years, average transaction size trended differently, ticking up for the second consecutive year. This rise in transaction size was elevated by Paul, Weiss, Rifkind, Wharton & Garrison’s 765,931-square-foot deal to relocate to 1345 Avenue of the Americas from 1285 Avenue of the Americas. The law firm’s deal was not only the largest in New York City but represented the largest office lease executed nationwide last year. 

New leases accounted for just four of these top ten deals but their average transaction size well outpaced that of the average for the remaining six renewals. In 2023, new deals on this list reached an average transaction size exceeding 541,000 square feet, while renewals, on the other hand, averaged about 345,000 square feet, marking a difference of approximately 200,000 square feet.

Weill Cornell’s 30-year commitment to 575 Lexington Avenue stood out among the longest term lengths tracked since 2019 by these lists. It ranked just behind other education and medical tenants that completed long term deals in 2021 and 2022: Icahn School of Medicine signed for 396 months in 2021 and Touro College for 377 months in a 2022 deal.  

Park Avenue Locations and Existing Buildings Defined the Top Ten Deals in Shift from Prior Years

Older buildings and the Park Avenue submarket dominated 2023’s top deals, with all top transactions on the list signed in existing buildings, marking a shift with none of the top ten deals occurring in new or recently renovated buildings. The youngest office tower on the list, 450 Lexington Avenue, built in 1991, secured the most valuable lease from Davis Polk & Wardwell. 1345 Avenue of the Americas and 110 William Street secured the second and third most valuable deals, respectively, and were constructed prior to this year’s average built year among the top ten deals, which is 1965.

In 2023, the absence of new construction was notable, and while two top ten deals were in trophy properties, it marked a decline from the previous year, representing the lowest presence of trophy properties on this list since 2020. The number of top deals in trophy buildings dropped from four in 2022 to two in 2023. This year’s trophy deals included the 32-floor, 910,000-square-foot, RXR owned 450 Lexington Avenue and the 1,278,807-square-foot 280 Park Avenue owned by SL Green and Vornado Realty Trust.  Overall, nearly a quarter of the top deals on the top ten lists have transacted within trophy buildings since 2019.

Law Firms Ink the Highest Share of Valuable Deals 

Legal services accounted for four out of the top 10 ranked deals in this year’s list, marking the largest share since this list was initiated in 2019. Overall, FIRE and Legal Services have accounted for nearly half of the tenants appearing on these top 10 lists since 2019 (46.0%). Broadly, law tenants have been identified as a bright spot in the Manhattan office leasing market in 2023, possibly due to their average office occupancy significantly exceeding that of industries overall, as per Kastle Occupancy data. These four legal transactions were also evenly split between relocations and renewals. Cadwalader, Wickersham & Taft, a long term Downtown Manhattan tenant, recommitted to a 225,00-square-foot office in 200 Liberty Street at Brookfield Place, while King & Spalding will relocate to 1290 Avenue of the Americas

Remarkably, TAMI did not appear in 2023’s list in its first occurrence. This is also emblematic of market-wide trends, especially in Manhattan. Once a market-mover, the TAMI sector has pulled back in 2023 from new space expansions as it wrangles with rightsizing from hybrid work and layoffs. In addition, the sector continues to make up a significant amount of available sublease space. According to CompStak’s data, the average effective rent for TAMI deals that are being signed is down 4.0% from 2019 levels to 2023.

Park Avenue Submarket Boasted Most Top Value Deals of 2023 Across Manhattan Submarkets

Since 2019, Midtown has captured the largest share (64.0%) of top value deals according to five years of top ten rankings for The Real Deal. Most of these Midtown deals have primarily occurred on the West side of Midtown, driven by transactions in Hudson Yards and the Sixth Avenue submarkets. However, high-value activity shifted east to Park Avenue in 2023. Four of the top ten deals in 2023 were concentrated on the Park Avenue corridor from 44th Street up to 52nd Street. Park Avenue deal’s included Citadel’s master lease for 585,000 square feet at 350 Park Avenue. Citadel plans to later raze this property as well as 40 East 52nd Street  and develop a new 1.7-million-square-foot New York City headquarters for the financial firm in its place. As Park Avenue gained prominence, Midtown South’s presence on this list waned as compared to the previous year, with only one top 10 deal inked in that market—Polo Ralph Lauren’s renewal at the Starrett-Lehigh Building in Chelsea

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