NEW YORK CITY-Anyone who thought Midtown South's chokehold was unsustainable will be surprised to note that it has tightened even further, according to new research. The data, a June report on Manhattan by Cassidy Turley, also indicates Midtown is experiencing a strong recovery while conditions Downtown are a bit tougher as more space is being added. In good news though, increasing employment figures and job creation continue to push the market upward. Manhattan's net positive absorption was 860,316 square feet in May.
Meanwhile, demand for space in Midtown has picked up, with positive absorption up over half a million square feet year-to-date, the report states. In May, 621,993 square feet of positive absorption was reported, dropping the availability rate down to 11.6%, a 20 basis point decline from April.
The Fifth Ave./Madison submarket improved significantly over the last two months as leasing activity picked up. In addition, the demand for high-end space with a growing number of tenants willing to pay more than $100 per square foot rose, with 24 such leases signed so far this year, compared to 34 throughout 2012. Those agreements produced a drop in availability by 210 basis points to 13.0% since the peak in February 2013 of 15.1%.
More bragging rights came to Midtown South as the submarket continues to lead the way in recovery, with availability dropping 110 basis points to 8.4%, the report says. The removal of 694,485 square feet at 532 Washington St. from the market, which sat vacant for seven and a half years, contributed to the 907,204 square feet of positive absorption in May. A group of investors comprised of Fortress Investment Group, Atlas Capital Group and Westbrook Partners bought the remaining interest in the property at the end of last year and will keep the space off the market until its redevelopment potential is determined. Class A asking rents rose $0.07 per square foot to $69.34 and Class B went up $0.76 to $57.98 per square foot.
News of a large block of office space coming onto the market pushed Downtown's availability rate up by 70 basis points to 14.3% in May, the report states. AIG confirmed that it plans to vacate a 728,736-square-foot space at 180 Maiden Lane next May. The block comes on the market at the same time that an additional 5.9 million square feet of space is expected to come online with the imminent completion of One Word Trade and Four World Trade. Though the two buildings are approximately 50% leased, they still will add 2.5 million square feet of available space, which could send the availability rate Downtown to spike above 16%. In May, Class A space asking rents dipped $0.81 per square foot to $52.61 and Class B inched up $0.13 to $36.21 per square foot.
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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.
