NEW YORK CITY-Manhattan office dwellers largely stayed put in 2012, with the 10 largest deals of the year being renewals rather than relocations, according to Peter Turchin, evp at CBRE, which held its fourth quarter briefing—and, informally, made 2013 predictions—at a quarterly media briefing on Tuesday. In spite of this trend, prices showed no sign of fall-off and, segment-wise, the big story was Downtown, which thrived throughout 2012 and appears poised for luck in 2013.
“Overall Manhattan office leasing activity was down 20 percent year over year at 22.3 million square feet leased,” said Kyle Schoppmann, senior managing director, in a release on the briefing. “However, despite lagging leasing and an availability rate that increased to 11.9 percent from 10.7 percent in 2011, Manhattan average asking rents continued to climb to $58.84 per square foot, compared to 2010's recession bottom of $48.32.”
“There were some large relocations, such as Kaye Scholer to 250 W. 55th St.,” Turchin noted, “but those weren't the biggest deals of the year.”
The one area that was an exception to the renewal trend was the tightly squeezed Midtown South, where growing tenants' need for larger space pushed them out of the market or, in some cases, increased rents drove companies away, Turchin noted.
Rents skyrocketed, in fact, added Schoppmann. “The average asking rent in Midtown South increased by 22% to $55.14, a 10-year high for the market.” Those rates may seem stratospheric but new and modern companies, like technology firms, have set their sights on the area, making potential tenants willing to pay a premium to get in.
“At 8.6%, Midtown South continues to have the lowest availability rate of any market in the country,” she said.
Meanwhile, Downtown was a hot bed of activity. “The fourth quarter was strong compared to 2011 as well as the five-year average,” said Sheldon Cohen, senior managing director. “Despite Sandy's impact, there was 1.2 million square feet of leasing activity in the fourth quarter, outpacing fourth quarter 2011's leasing activity of 1.1 million square feet by 9%,” he added in a statement. “Downtown actually beat its five-year quarterly average of 990,000 square feet by 24 percent, leasing 1.23 million square feet in the fourth quarter.”
The market is another area that's drawing corporations seeking new and contemporary offices, noted Cohen. “We're seeing a real alignment between the type of tenant coming in—corporations that have modern needs—with the type of space coming online.”
In addition, when some of the World Trade Center buildings start to become available and the World Financial Center begins to seek out new tenants, more companies in need of a home will surface Downtown, said Adam Foster, svp.
“There's going to be a lot of demand as companies needing 250,000 square feet or more won't fit in midtown,” he said. “Plus, the infrastructure and pricing Downtown are compelling.”
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Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
