Luxury Class A office space - Not for everyone!
January 29, 2026
Hello,
350 Park Ave is the latest planned Class A office development, following in the footsteps of One Vanderbilt, 425
Park Ave, JPMorgan’s 270 Park Ave, 30, 50 & 100 Hudson Yards. These buildings are loaded with amenities that go
far
beyond traditional office offerings. Some of these amenities include gyms, spas, meditation centers, roof decks,
a swimming pool and even an in-house restaurant and coffee bar. So, who are these end users, and what drives
them to these spaces?
For outsiders, the dissonance between the news and headlines about a “weak office market” and between asking
rents,
reaching over $200 psf in these new Lux towers—which are over 90% occupied (and in the case of 425 Park Ave and
One
Vanderbilt, are 100% occupied !!) can be confusing.
Since the demand for office space is not new, but rather coming from within the city, this dynamic
inevitably
leads
to Class A space cannibalizing Class B and C inventory, which will continue to struggle in the years to
come.
These high rents were historically associated with prime retail, not office space. Yet employers mostly from
finance, law, and tech, who ink these leases signal confidence, long term predictability, and most of all status
to the talent they seek to hire both in the US and abroad.
The gravity of these spaces encourages collision, accelerated learning, compressed decision cycles, and helps
identifying top performers faster. In a sense, these spaces act as an operating system for a competitive
environment where attrition is a feature, not a bug.
In a city defined by a relentless flight to quality, these buildings represent the future: firms competing for
talent, and employees who want to be here, are willing to work hard, and work long hours. These end users need
to
live in the city.
Many Class B and C office buildings that could have been converted or repositioned already have been. Those
that
are not convertible, because of extra-large plate and depth, low efficiency and other reasons, will likely
be
demolished or endure several years of diminishing demand until demand catches up to the supply.
Historically, when office leasing thrives, residential sales tend to follow—subject, of course, to the
constraint
of interest rates.
With rental vacancy close to zero, at 1.4%, for-sale inventory at an absorption rate of roughly six months, and
a
limited new-development pipeline, these coveted Class A office tenants are the future buyers of some of the
prime
residential inventory in town.
Out of the 3,838 unsold units of new condos, 900 units are concentrated in a few large condominium projects in
FiDi
and Midtown (Such as 1 Wall St. 125 Greenwich, & Waldorf Astoria)
Many of these buyers will sort through the new inventory and “old new inventory" for their future home. Some
condo
projects, like mid-tier office product priced at a premium, will only trade if prices are adjusted to market.
When circumstances conflate the weak dollar, which will bring foreign buyers back, limited new supply, and
possible lower rates in the spring–Summer 2026, this will be a year of absorbing some existing new
product,
and healthy sales volume, which will likely be stronger than recent years but without the frenzy of a bull
market, or major price acceleration, as we move to 2027.
Ariel and the team
