Luxury Office Space in Manhattan: Is a Trophy Floor Worth It After a Raise?

What luxury and trophy mean when the tenant is a startup

Neither word is an official grade. Trophy is trade shorthand for the very top of Class A: the newest and best-known towers, high floors, conference centers and amenity levels, held by landlords with the money to keep them that way. Luxury is looser. It also takes in penthouse lofts and boutique buildings, where the price buys character and a prime address in the submarket, not height. Class A, B and C explains who assigns the letters.

What the extra rent buys is light, views, modern elevators and air handling, a staffed lobby and an owner who can fund an improvement allowance. It never buys more room per person.

The cost of a premium address, measured in runway

Landlords price by the rentable square foot, per year, and a team needs about 175 square feet a person whatever the rate. So the premium lands on every seat. As a worked example, say a 30-person company needs 5,250 square feet and is choosing between a floor that asks $75 and one that asks $125: the gap is $50 a foot, $262,500 a year, about $21,900 a month. Hold that number against the hiring plan.

Electricity, yearly increases of about 2.5 to 3 percent and any construction the allowance does not cover come on top in every band. The floors listed below all sit in the top band, $100 and above, with current figures. Office space over $100 works the monthly math floor by floor.

Series A or Series B: when the trophy floor earns its rent

At Series A the honest answer is usually no. The team is 15 to 30 people, it is likely to be 40 to 80 by the next round, and whatever it leases will be the wrong size within a year. Money spent on a lobby is money not spent on the hires the round was raised for.

By Series B the case can turn. It turns for companies whose customers, investors or candidates visit often enough for the building to do part of the selling. One test settles it: would this address change a hiring decision or a sales decision? If yes, price it. If not, a well-kept floor one band lower does the same work. The Series A to Series B playbook deals with sizing between rounds.

What a funded company should put ahead of the view

• Flexibility. A term no longer than you can forecast, the right to sublet or assign, and a way to grow in place, such as first offer on the suite next door. A lease that outlives the plan it was sized for is the expensive kind of luxury.
• Speed. A premium floor that comes furnished or prebuilt can have the team in two to four weeks after signing. Building to your own design typically adds 10 to 16 weeks, and the bill for it arrives right after signing, the tightest point in a funding cycle.
• Infrastructure. Electrical capacity, the hours the air runs before overtime charges begin, freight access and the number of elevators. Ask for the building engineer's answers in writing.