NEW YORK CITY-Describing the recovery of both the office market and the city's economy as “trickle up,” new preliminary data on the third quarter from Studley points up many troubling trends.
“The biggest and most established companies anchoring Midtown and Lower Manhattan are still dumping deadweight and focusing on productivity and efficiency,” the report states. Or, put another way, cost cutting is still the modus operandi for many leading firms. Landlords appear to be catering to that, as Class A asking rents slipped by 2.1%, from $68.37 to $66.91.
Financial services continued to spiral downward, with the sector's employment falling to 434,608 in August, marking its lowest mark since December 2010. Notably no new Midtown leases of more than 100,000 square feet were completed in Q3, and volume in the subdistrict totaled 4.1 million square feet, marking the second time in the last four quarters that the amount of trades has been below the long-term historical average. And while the Plaza district has registered a resurgence of hedge funds nonplussed by $100 per-square-foot rents, most deals were for less than 10,000 square feet. In fact, the area did not have a single deal in the top 30 leases of the quarter, Studley's preliminary research reports.
On the positive side, technology and private equity firms are focusing on space quality rather than cost when considering a move. Desire to be in particular neighborhoods, to convey a particular image and to lease space that has growth potential is superceding the need to consider price in those sectors.
And Lower Manhattan continues to be the place for value. Price-conscious media, advertising and publishing firms are looking at the area. According to Studley, “Creditworthy tenants willing to commit to term can still generally negotiate a full year of free rent and generous improvement allowances up to $70.”
The Downtown migration also is attributable to Midtown South's continued tightening. In addition to small and mid-sized tech tenants anxious to be in the space, a host of fashion, consulting firms and retailers set their sights on Chelsea, the Meatpacking and Flatiron Districts.
On the flip side, says Studley, the World Trade Center, Hudson Yards and the Avenue of the Americas—still—are the best-positioned markets to accommodate large tenants. “Current market conditions are ideal for mid-sized and large corporate users in need of high quality space, as well as those trying to consolidate multiple locations. They have a virtually unprecedented pool of options to consider.”
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
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.
