According to JLL's New York Monthly Market Update for December, overall asking rents for office space in Midtown notched a 24% increase in the 12 months, with rents for class A space seeing "an unprecedented" jump of 34.6% year-over-year. "More significantly, the percentage increase is considerably higher than it was at the height of the market in 2000 when rents advanced by 21%," the report states.
Not to be outdone, Downtown office buildings registered its own rent increase, year-over-year, with class A rents increasing 17% and overall rents increasing 19%, the report adds. However, even with the jump Downtown space is still a bargain compared to Midtown, says Ken Siegel, managing director at JLL. "When looking for high-end, class A space rents are generally exceeding $100 per sf in trophy buildings [in Midtown], but Downtown is half off," he tells GlobeSt.com. "People are going to have to look Downtown."
As proof to Downtown's increased popularity, the report points out that several leases in excess of 100,000 sf were signed in December, and that only four blocks of space larger than 200,000 sf are available Downtown. Included in the recent leasing transactions Downtown were AIG's deal for 245,000 sf at 32 Old Slip in the Financial District and ABN Amro's deal for 138,820 sf at Seven World Trade, as GlobeSt.com previously reported. Midtown saw leasing activity as well, the largest being MetLife Inc.'s deal for 411,255 sf at 1095 Avenue of the Americas, as GlobeSt.com also reported.
And as we enter 2007, Siegel expects the pace of leasing activity to continue. "Fundamentals haven't changed; they are still strong," Siegel explains. "There is healthy demand and no new supply scheduled to come on line," The new Bank of America and New York Times buildings, he adds, are "at least 80% spoken for."
"There are still some tenants out in the market, and there is still demand from a number of law firms," he tells GlobeSt.com. "Also, there are a number of companies that have '08, '09, 2010 and even 2011 expirations so [those deals] may very well happen by mid-year. It's going to be an active year."
Helping to drive the rosy outlook for 2007, job growth projections are positive, which tracks closely with an increase in rents and a decrease in vacancy, Siegel says. And as supply constraints increase, companies may have to turn an eye elsewhere. "Brooklyn is an option, Jersey City is an option and I think we will see some action in Harlem."
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