The consumer - especially the wealthiest ones - has been proven willing to pay an enormous price premium for brand new, shiny houses and condos with all the latest bells and whistles. The convenience of time-savings is a factor. This concept is also playing out in the office building sector globally: while many older, more tired office buildings struggle to lease space after the COVID-era, work-from-home implosion, big, brand new buildings with big floorplates, tall ceilings, brand new infrastructure that allows for a better quality of life combined with tech capabilities are close to fully leased as demand for this quality of space has grown.
In London and New York City, it's the most expensive CLASS A office buildings that seem to be performing best. Yes, wide disparities exist in office buildings too. Class A office buildings with LEED certification - that highlights a healthier work environment - in walkable or conveniently located settings seem to fare best.
Last night I attended the opening party for a swell new Jean Georges restaurant in the base of a spectacular Norman Foster designed tower, a 47-story commercial skyscraper in Midtown East at 425 Park Avenue, the first new full-block building to be built along Park Avenue’s Plaza District in nearly 50 years. Aside from LEED certification, it also has Well Core certification at the Gold level due to the building’s full suite of health, wellness, and environmentally friendly features including abundant natural light, enhanced indoor air quality and water purification, and energy-efficient mechanical and ventilation systems.
Aside from impressive art, the building also boasts The Diagrid Club, an amenity and wellness center with another restaurant and meditation rooms. Even with astronomically high rents, the building is 85% leased. The same is true for the millions of square feet of CLASS A buildings in the Hudson Yards area.
This trend mirrors how many brand new condos - at premium prices - seem to sell while older apartments requiring renovation often sell for much lower prices and take much longer to sell. Now what happens to all the older buildings? To be competitive they will upgrade and adapt. Or convert to residential? Or be replaced the way 425 Park Avenue replaced the old 425 Park Avenue built in 1957?
