NEW YORK CITY-Is 2014 going to be the banner year that some are predicting? That all depends on where you sit, contends Michael Cohen, president, tri-state region, Colliers International.
“Midtown South will continue to be the charmed market in Manhattan; technology and the other sectors that tend to cluster there will continue to grow and absorb a disproportionate amount of space,” he says. “ But the bigger story for next year is 'what will happen in those markets to tenants who are being displaced by rentals that went from $30 per square foot to $50, $60, or even $80 if you believe some landlords. I think they will continue to flow into similar vintage buildings in the financial sector, so we will continue to see strength in pre-war financial district buildings, because of Midtown South refugees, and you'll see some overflow into the north.”
He continues, “We've already seen some overflow from Chelsea into Penn Plaza; the technology industry and the tenants its displacing are beginning to flow into the neighborhoods of the upper 20s and low 30s. That's an area that used to be driven by occupants interested in the convenience of Penn Station, now we're seeing those who want a 'Chelsea feel' while saving some bucks.”
Tenants along the East side also will move—they likely will head slightly north, Cohen states. “You'll see some migration of tenants along the east side, from Union Square and Park Avenue South moving north, up a stop or two on the subway into the Grand Central district. It began with salesforce.com at 685 Third Ave. and I think you'll see more of that ahead because the growth is no longer coming from the finance, legal and real estate sectors.”
In fact, he asserts, “I've never seen so many big law firms trying to dispose of space at the same time. Greenberg Traurig and DLA Piper are in the market,and there are rumors that Debevoise & Plimpton is too. Meanwhile, when you meet with tech tenants, they say 'Where can I get more space, or grow, in this building? My venture capitalist is letting me double my space from three years ago, but I don't have the capital now so I need to know I can do it in the future.'”
“Until the FIRE sectors comes back, Midtown will continue to be the cheaper market,” says Cohen. “And we have a lot of new supply entering the market in 2014 so there won't be upward pressure on rental rates.”
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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.
