Rents for Midtown South class B buildings rose to $47.87 per sf in the second quarter of 2007 from $41.83 per sf in the first quarter of 2007. The submarket was the only sector of Manhattan to see class A rents grow at a larger pace than class B rates. Midtown South class A average asking rents jumped 61.1% at midyear 2007 after a block of 96,000 sf of office space at 11 Madison Ave. was put on the market with asking rents in the upper $80s. Class A average asking rents in the submarket's increased to $71.18 per sf from $44.18 per sf the previous quarter.
"With tenant interest in Manhattan office space continuing unabated, average asking rental rates will escalate further," says James Delmonte, VP and director of research, with Jones Lang LaSalle's New York City office. "Most of New York's office submarkets have reached single-digit vacancy rates, and new space is not being added to the market fast enough to meet demand."
Midtown South should continue to see significant escalation in rental rates as it was the tightest office market in Manhattan at midyear 2007. Trinity Real Estate's decision to convert 330 Hudson St. to residential or hospitality use took more than 400,000 sf of office space off the market. As a result, class A vacancy rates in Midtown South fell 44.4% at midyear 2007, dropping to 2.8% from 5% in the first quarter of 2007. Class B buildings saw vacancy rates fall 29.4% during the same time period, slipping to 4.4% from 5.9%.
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