NEW YORK CITY-For anyone wondering when Midtown South would end its long reign as the nation's tightest submarket, the answer is: not yet. The area experienced a 120-point-basis drop in availability last month, bringing it to 7.6%, its lowest level since early 2006, according to new research by Cassidy Turley.
Overall, Manhattan's office sector turned in a solid performance for January, with class A rents increasing to $72.78-per-square-foot, up $0.66-per-square-foot from the fourth quarter. Availability remained at 10.8%, despite several large spaces becoming available in Midtown and Downtown. The borough posted negative absorption of 266,231 square feet to start the year, but that came on the heels of realizing 7.1 million square feet of positive absorption throughout 2013.
Midtown's availability increased last month while Downtown's also rose, but it was Midtown South that dominated the start of the year, Richard Persichetti, VP, research, marketing and consulting, tells GlobeSt.com. “Even the cold weather we've been experiencing in January could not slow down the market. Midtown South's resilience shone through the snow with some major deals being signed to start off 2014. This caused Midtown South's availability rate to drop to the lowest it has been in more than seven years.”
More specifically, absorption in the area came in at a positive 867,409 square feet in January after Sony leased 520,000 square feet at 11 Madison Ave., Twitter took 140,000 square feet at 245-159 W. 17th St. while MasterCard and Mashable took a combined 96,630 square feet at 114 Fifth Ave. Class A asking rents decreased by a slight $1.02-per-square-foot from the previous quarter, to $71.75-per-square-foot.
Meanwhile, Midtown's availability increased 30 basis points in January to 11.1%, almost solely due to the media and publishing industry. The Durst Organization put Condé Nast's 817,252-square-foot block at 4 Times Square on the market as the firm readies for its move to One World Trade Center. This large block and an additional 228,926-square-foot space at 237 Park Ave. contributed to the negative 871,775 square feet of absorption in January. Class A asking rents did rise by $0.86-per-square-foot though, to $80.89-per-square-foot, since the fourth-quarter.
The submarket rang in 2014 as the first site of a $1 billion investment transaction for the year. A joint venture led by Related Cos. acquired Time Warner's 1.1 million-square-foot office unit at the Time Warner Center for $1.3 billion. Time Warner also completed a leaseback until their space at Hudson Yards is completed.
Activity Downtown got off to a slow start. Availability increased 40 basis points, to 13.3% due to several blocks in the submarket becoming available for occupancy in January 2015. Absorption posted negative 261,865 square feet. Class A asking rents dipped $0.33-per-square-foot to $54.98-per-square-foot in January. Leasing activity Downtown was led by Allied World Insurance extending their lease on a direct basis as well as expanding for a total of 143,297 square feet at 199 Water St.
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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.
