Defying conventional wisdom that $100 per sq. ft. might be too steep for commercial office rents in the current real estate climate, the Bank of America Tower under construction in Manhattan is 98% leased up, according to developers, at rates that exceed $100 per sq. ft. on lower floors and $185 per sq. ft. near the top.
The $1.3 billion, 55-story building, which will be Manhattan's second tallest behind the Empire State Building, is already drawing crowds as it juts onto the New York skyline. The Class-A structure is on target for completion in May 2008.
BOA, which co-developed the tower with The Durst Organization, based in New York, has leased nearly 80% of the building at One Bryant Plaza and will consolidate its New York operations there. BOA's corporate headquarters remain in Charlotte, N.C.
Tenants also include the law firm Akin Gump Strauss Hauer & Feld, which leased six floors, fashion designer Elie Tahari, and Durst, among others. The tower will also provide a home to the reconstructed Henry Miller's Theater, which seats 1,000.
“Once the building's curtain wall and spire are finished, then its true shape and impact on the skyline will be seen,” says Jordan Barowitz, a spokesman for Durst.
The building's impact is already evident to commercial real estate developers. Some had been skeptical that a high-rise — even one located near Times Square and chock-full of such “green” amenities as waterless urinals and a system to capture rainwater — could draw top rents in view of the fallout over the subprime mortgage crisis in the residential sector.
“It was phenomenally successful,” observes Kent Swig, president of Swig Equities, one of New York's largest developers and investors. Swig Equities has bought or initiated development of more than $3 billion in real estate, including commercial properties in Midtown and Lower Manhattan.
The BOA tower makes an important statement, Swig says. After the terrorist attacks of September 2001, there was great concern that major companies might not want to build in New York. But the decision of Bank of America, the nation's largest bank, to co-develop a $1.3 billion signature building in Manhattan shows confidence in the city's commercial health, Swig says.
Kenneth D. Lewis, CEO of Bank of America, has said the tower represents a long-term commitment to New York. The tower's rents are among the country's highest, and Durst confirms that all but 32,000 sq. ft. of the 2.1 million sq. ft. structure has been leased at rates exceeding $100 per sq. ft.
Jones Lang LaSalle, a consultant on the tower, reports that Class-A buildings in Manhattan with at least 30 floors command an average taking rent of $86.36 per sq. ft. compared with $63.75 per sq. ft. of Class-A space overall. In new high-rises, the financial services industry was the largest occupier during the second quarter of 2007.
From the start, the tower designed by New York architects Cook + Fox seemed financially risky because it had so much space to fill, says Swig. But developers secured tax-free Liberty Bond financing, controversial because the bonds were created to finance Lower Manhattan projects after the 2001 attacks. Another advantage — Durst owned the land.
“They got very good financing and achieved some of the highest New York rents in years,” says Swig. “They'll have astronomical returns, I think.”