The Midtown South office market may have finally begun to stabilize after a rocky year of rate slumps. The report indicates overall availability increased only slightly last month, from 13.1% to 13.3%. The area returned 182,498 sf to the direct market and 11,237 sf of sublet space, while asking rents remained relatively stable, dipping from $34.40 to $34.12.
"A great deal of Midtown South sublet space, particularly from new-media companies, was on the market earlier than September of last year," Steve Schofel, executive managing director at Newmark, tells GlobeSt.com. "The area has simply had more time to even out."
In Midtown, overall availability nudged from 9.9% to 10.2% during February. Direct availabilities climbed from 6.4% to 6.6% while the sublet rate increased from 3.5% to 3.7%. 529,278 sf was returned to the Midtown market, according to the report. Asking rents in Midtown continued to slump, from $56.44 to $55.51, as did sublet rents, which fell from $56.17 to $54.95.
The quality of available space in Midtown will ensure a healthy area-market in the long run, says Schofel. "To me, Midtown has been the most stable market traditionally," he says. "Large blocks of class A space are trading at a higher velocity here than in Midtown south or Downtown, where you see a lot of commodity availability."
Downtown continued its availability upswing last month, rising from 13.7% to 14.01%. The Newmark report attributes this slump to cleanup issues, air quality concerns and transportation and access problems near Ground Zero.
"In some of the buildings near ground zero, the tenants were small and mid-sized companies with not enough insurance to cover the damages," says Schofel. "This has resulted in additional vacancies downtown as that space sits vacant."
The Downtown area returned 351,575 sf, 103, 216 sf to the direct market and 248,359 sf of sublet space in February. Similar to Midtown, the report indicates Downtown's asking rents dropped nearly a dollar, from $39.24 to $38.23.
As the US economy goes, so go the leasing rates in Downtown. As Schofel tells GlobeSt.com, "If companies experience even a slight uptick in business, you'll see them taking space because the rents are attractive and they have already cut all the fat out."
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