NEW YORK CITY-As Midtown South continues to flourish—leading to low vacancy rates and high rents—several tenant types are seeking space in other parts of the city. The latest groups to spread their wings are the technology, advertising, media and information sectors, or TAMI, says Cassidy Turley's latest office market snapshot report, which tracked activity in the fourth quarter of 2012 and was released on Monday.
“Midtown South's popularity and escalating asking rents, currently at $49.69 per-square-foot, are pushing tenants to consider more affordable locations such as Brooklyn, the Penn. Station/Garment District and NoMad (North of Madison Square Park),” the report states. “Rents are rising as high as $75 to $80 per-square-foot in some cases; when the first lease is signed for 51 Astor Place, it could get as high as over $90 per-square-foot,” Wayne Van Aken, VP of Cassidy Turley tells GlobeSt.com.
At the same time, office space inventory in other pockets of the city—such as the aforementioned Garment District and NoMad, as well as Downtown and Brooklyn—has been markedly enhanced, giving businesses ample reason to start looking elsewhere for space.
“The trend is just beginning and will really pick up in 2013 as TAMI companies embrace NoMad up to about 40th street,” Van Aken predicts. “If you look back, when we had the first Internet bubble in the late 1990s/2000, I think all the landlords in Chelsea, the Flatiron District and Gramercy saw that a new industry was evolving and said 'we need to upgrade our buildings with better infrastructure, technology and lobbies and wait for the next wave to come in.' ”
Among the improvements that have come in recent years to these new and upcoming areas, according to Van Aken, are a new entrance, lobby and elevator cabs at 1370 Broadway; a new lobby, façade, common corridors and bathrooms 1375 Broadway, at 37th Street; a renovation now underway to create a new lobby, elevators and improve fire safety at 256-260 West 38th Street; new high-end bathrooms, corridors and pre-built finishes at 104 W. 40th St.; and extensive upgrades are planned at 31 W. 27th St.
“These buildings are now comparable, or even an upgrade, over what people have seen in midtown South,” according to Van Aken. Keen interest in the area has followed these extensive renovations. Among noteworthy fourth quarter moves beyond Midtown South by TAMI companies was the relocation of Nielsen to 85 Broad St., where it leased 115,205 square feet; and the leasing of 100,000 square feet by Epiq Systems at 685 3rdAve. And earlier today, it was reported in GlobeSt.com, Harper Collins signed on to lease 180,000 square feet of office space downtown.
“Once you had the success of 200 5th Ave., plus the opening of the Ace Hotel, the NoMad area had some chic, hipness and glamour,” Van Aken continues. “If you look now at the number of building sales north of 25th St. and going up Broadway over the last 18 months, it's off the charts.”
And TAMI companies will find these refurbished digs come with more cost-effective prices than midtown South space, notes Van Aken. “TAMI companies are going to find that they're priced out of midtown South but they can find significant discounts by moving 15 blocks north.”
According to the Cassidy Turley research, year-over-year, Midtown South rental growth was up 15.6 percent, while asking rental increases slowed in Midtown, with only a .4% increase in the fourth quarter after asking rents rose 8.8% over the first three quarters of the year.
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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.
