By Daniel Geiger
The Vector Group has renewed its lease for the top floor of the boutique trophy building 712 Fifth Avenue for triple digit rents, according to sources.
The firm, which holds ownership stakes in several ventures, including companies involved in the tobacco business and the residential real estate brokerage Prudential Douglas Elliman, will extend its lease for 712 Fifth’s entire 52nd floor, a roughly 9,000 s/f space, for seven years. Its current lease was set to expire in 2013.
Vector agreed to pay exorbitant rents in the deal, at $145 per s/f for the first five years of the lease and $155 per s/f for the remaining two years, according to sources.
Brokers said the economics and timing of the transaction suggested larger market trends. Small tenants like Vector typically negotiate leases much closer to their expiration, not years in advance, sources familiar with high-end, small-sized tenants said.
The terms of the deal seem to assume a continued escalation in rents. Although 712 Fifth is known as one of the city’s most prestigious skyscrapers, $145 per s/f would put the building in the company of some of the city’s most expensive addresses, such as 9 West 57th Street and the General Motors Building at 767 Fifth Avenue.
In recent months, tenants have tried to lock in the bargain rents that came about amid the recession. Vector has appeared to buy into sky-high rates with the assumption that the high-end market will only get more expensive.
Earlier this week, Cushman & Wakefield presented its analysis of the office market in a meeting with the media, reporting a quickening of high-end deals this year that appeared to be returning to a level not seen since the peak. Cushman chief operating officer Joseph Harbert said that rents in top-end buildings could even eclipse previous highs during the next upward cycle.