NEW YORK CITY-Office leasing activity here “really depends on where you are standing” as to whether it is booming or just hanging on, said Peter Turchin, executive vice president CBRE, at the firm’s third quarter press briefing. And – perhaps unsurprisingly - the lucrative Midtown South area has certainly been booming, according to data this morning. Turchin said that average asking rents in the neighborhood hit the “highest number we’ve ever had” - figures that “top the market since 08.” Put it this way: $53.40 per square foot as of September is nothing to sneeze at.
It certainly offset the area’s leasing activity, which was described as “marginally below” the five-year monthly average of 330,000 square feet, although YTD leasing was slightly ahead of last year. But all hope is not lost: Turchin added the market is “very, very active” and there has been some tenant growth in the area, mostly small tech companies (much to Mayor Bloomberg’s delight.)
On the other hand, construction for hotels in Midtown South is looking good, according to Bradley Burwell, vice president CBRE Hotels, making the area a pretty bright spot for the city overall. “That is where we are seeing a lot of construction and a lot of interesting transactions,” Burwell explained, citing the Chelsea Hotel – he called it “trendy and chic” – as one of several “transactions that anticipate the midtown south market will continue its robust growth [and] make it the new go-to market for hotels.”
While leisure and business travel has been up for the city, group travel is down and Burwell doesn’t expect it to come back immediately, citing a three to five year planning cycle for conventions, conferences and other en masse events. “The one segment of demand that suffered through the recession that has not come back to the same degree was group demand,” he said. “2008 was when it stopped. 2010 was the first time people started saying let’s start planning our meetings again. It’s not all back yet.”
Downtown, however, is back although Turchin explained, maybe not for office subleasing. “If you’re a tenant looking for sublease space, downtown is not really your market. “ And in the third quarter, this area saw increased availability as 114,000 square feet of space opened at 125 Broad Street. This and other large vacancies can be hard to fill and landlords have shifted their mentality to bringing in lots of smaller tenants instead of one behemoth.
“We’re seeing again that over 100,000 square foot transaction is the thing that’s missing from the downtown market,” he said, citing leasing activity data for September to be only at 0.27MSF. Instead, he continued, “what you’re seeing is a lot of landlords looking for smaller tenants.”
“Blocks are not leased through large tenants but through smaller tenants eating up the blocks – that’s how things get leased these days,” Turchin concluded.
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