Starr is expanding its commitment to developer BXP’s high-profile New York tower 343 Madison Ave. even before it opens, deepening its foothold at one of the city’s most closely watched office developments.
The global investment and insurance firm has added two floors to its lease, bringing its total footprint to about 325,000 square feet, according to Hilary Spann, BXP’s executive vice president for the New York region. Starr had previously signed a 20-year lease for 275,000 square feet across floors 16 through 27, representing about 30% of the 930,000-square-foot building that will offer direct access to Grand Central Terminal.
The early expansion underscores the continued strength of demand for top-tier office space in Manhattan, the biggest U.S. office market, where limited availability is pushing rents to record levels and reinforcing pricing power for new trophy developments.
Spann on Tuesday declined to disclose rent terms but said they are “very consistent” with BXP’s underwriting and expected returns for the project. CoStar News emailed Starr, based at 399 Park Ave. in New York, for comment but didn’t immediately hear back.
Scarcity at the top of the midtown office market has recently driven deals above $320 per square foot, including at SL Green Realty’s nearby One Vanderbilt and Soloviev Group’s 9 W. 57th St. just south of Central Park.
At 343 Madison, office rents on lower floors are expected to be just under $200 per square foot, while BXP has recently responded to some inbound interest for five top floors with offers of $350 per square foot, Spann said.
“At this point we are relatively inflexible about that number,” she told CoStar News on the sidelines of Nareit’s REITweek investor conference in New York. “We have plenty of time to lease them if someone wants to take five floors. Otherwise we’ll lease them floor by floor. … We are holding the line on the value at the top of the building. … We certainly think that it’s possible, and our competitors are sending those same sort of proposals out.”
The pricing reflects continued flight-to-quality demand, which has driven leasing activity in Manhattan and other gateway markets. In New York, other major landlords including SL Green and Vornado Realty Trust have also pointed to a tightening landlord-friendly market for top-tier space. SL Green CEO Marc Holliday said in April that trophy office vacancy in East Midtown fell to 3.4% at the first quarter's end.
That demand is steering the next wave of development.
New supply targets premium tenants
343 Madison, near JPMorgan Chase’s new ground-up headquarters building at 270 Park Ave., has implied net rents of $170 per square foot or gross rents "well in excess" of $200 per square foot, Evercore ISI analyst Steve Sakwa previously estimated. Piper Sandler's Alexander Goldfarb said last year 343 Madison marked “the best current development site" in New York.
Designed by Kohn Pedersen Fox, the 46-story tower, with an estimated cost of $2 billion, is set to feature a dramatic double-height, client-exclusive club with terraces overlooking midtown.
There are also plans for a lobby cafe and bicycle storage with cabanas and showers, BXP has said. The building will be fully electric and feature a direct outside air system.
“There are just certain categories of clientele, including hedge funds, private equity, asset and wealth managers, that have a need for luxury product,” Spann told CoStar.
She added that “they need for their employees and for their clients to have an absolutely second-to-none experience when they come into their space. That's really driving their need to be in a premier workplace and in highly amenitized buildings. … It's very much being driven by the requirement of these companies to attract and retain great talent, and then to service their own clients.”
A case in point, BXP is dedicating the top two floors of 343 Madison to a shared amenity club for tenants.
Project seen as ahead of competition
BXP also is in talks with two additional tenants at 343 Madison and expects to sign those leases by the end of the second quarter for 200,000 incremental square feet, which will take the project to 56% preleased, Spann said at the Nareit event.
BXP expects to begin delivering space to tenants in mid-2028, with occupancy starting in mid-2029, putting 343 Madison “at least a couple of years ahead” of competing developments, she said.
Beyond New York, BXP is pursuing similar ground-up office development in other gateway markets as demand for top-tier space picks up.
Office rebound and flight-to-quality demand is not just a New York story, BXP President Douglas Linde said at the event, adding "things are getting better everywhere.”
BXP is reshaping its broader portfolio to respond to the demand.
The real estate investment trust, for instance, is selling a trio of interconnected buildings in downtown Washington, D.C., as it plans new ground-up luxury office buildings.
“We have clients that are literally coming to us and saying, ‘We love a new building. If you can find a site, we will sign a lease,'” Linde said.