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<\/p>\nA tower that just wrapped up construction on the Upper East Side has no comparison in recent Manhattan memory.<\/p>\n
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\n Extell’s 1520 First Ave. under construction in August 2024\n <\/p>\n
The tower at 1520 First Ave.<\/a>\u00a0is poised to be the first ground-up medical office tower in the borough in decades. And its developer, Gary Barnett<\/a>‘s Extell Development, is seeking the highest rents that market watchers have ever seen.<\/p>\n \u201c1520 is definitely top of the market,\u201d said Elliot Dennis, founder and principal broker of medical office specialist Dennis Healthcare. \u201cIt’s new construction. It’s the first one of its kind in a very long time.\u201d<\/p>\n Barnett put together the assemblage for the 30-story, 425K SF medical office building\u00a0in 2018<\/a>. He landed the Hospital for Special Surgery<\/a> as a tenant for 200K SF across the building\u2019s first eight floors\u00a0in 2021<\/a>\u00a0and tasked Newmark<\/a> with leasing up the remaining 235K SF.\u00a0<\/p>\n \u201cOffice demand is very, very strong right now,\u201d said Newmark Executive Managing Director Jonathan Fanuzzi<\/a>, who is leading the leasing team. \u201cEven for small groups, the options for them to find space are somewhat limited.\u201d<\/p>\n The building\u2019s remaining space is split into two sections, each with triple-digit asking rents. The ambulatory care facilities, occupying floors nine through 16 with floor plates averaging 17K SF, have asking rents that start at $100 per SF. And its 6K SF tower floors, from 18 through 30, are\u00a0seeking $125 per SF.<\/p>\n Those rents are steep for traditional healthcare tenants, said Mitsuko Ueda, Mount Sinai\u2019s director of real estate acquisitions and dispositions.<\/p>\n \u201cI personally haven\u2019t been dealing with $125 per SF just for the doctor\u2019s office,\u201d she said. \u201cEven if it’s a retail space, we’ve been negotiating something below $100.\u201d<\/p>\n Fanuzzi and Dennis, who are respectively\u00a0negotiating for space in the building on behalf of the landlord and tenants, said they couldn’t disclose lease\u00a0details because they hadn\u2019t closed deals yet. Extell<\/a> didn\u2019t respond to a request for comment.<\/p>\n Extell\u2019s rents and floor plates indicate it is targeting tenants who offer the same level of service as the\u00a0concierge medical facilities<\/a>\u00a0that surged during the pandemic \u2014 quick appointments, plush receptions, short waiting times \u2014 for boutique treatments, brokers said.\u00a0<\/p>\n Mount Sinai, by contrast, typically looks for footprints of roughly 20K SF where it can house several outpatient centers in a single space in the name of efficiency, Ueda said.<\/p>\n \n Courtesy of Extell Development\/Neoscape\n <\/p>\n \n A rendering of 1520 First Ave.\n <\/p>\n \u201cThe tower floors are definitely ripe for plastic surgeons, dermatologists, maybe a high-end cosmetic dentist, potentially some specialties with some sort of procedure-based practices,\u201d Dennis said. \u201cBecause those are the ones that you know can carry a premium rent, like the ones that they have at 1520.\u201d<\/p>\n The development\u2019s location in the\u00a0Upper East Side<\/a>\u2019s medical hub is likely to add to demand for its space, Dennis said. The corridor has been home to some of NYC\u2019s biggest hospital systems\u00a0since the early 1900s<\/a>.<\/p>\n Medical practices signed 5.4M SF of leases in Manhattan between 2018 and 2024, and the Upper East Side was the No. 1 market for patient care uses, according to a\u00a0report from CBRE<\/a>. Those facilities run the gamut from pediatric doctors to\u00a0plasma exchanges<\/a>\u00a0and\u00a0ketamine clinics<\/a>, which often\u00a0gravitate toward<\/a>\u00a0the neighborhood.<\/p>\n But much of that leasing is in buildings that weren’t developed with healthcare in mind. The UES is primed for new medical space like Extell\u2019s development, Dennis said.<\/p>\n \u201cThe reality of a lot of the Upper East Side healthcare spaces on the ground is that they’re old and they’re tired,\u201d he said.\u00a0<\/p>\n And tenants have even less space to choose from than they did a year ago.<\/p>\n Manhattan\u2019s office market is booming, beating\u00a0its pre-pandemic leasing records<\/a>\u00a0last year, signing 43M SF of leases and ending the year with an availability rate of just 13.9%.<\/p>\n Demand\u00a0is heavily concentrated in trophy and Class-A buildings, but landlords also took 2.1M SF of office\u00a0space off the market last year for conversions,\u00a0according to Colliers<\/a>.<\/p>\n Some of those properties destined for conversion were the types of buildings that marketed themselves to medical tenants with discounted rents in an attempt to increase occupancy, Dennis and Fanuzzi said.<\/p>\n<\/p>\n