NEW YORK CITY-Midtown bounced back in February, and Midtown South stabilized, but the month belonged to Downtown, which kicked into high gear after a slow start to the year, according to a new report from Cassidy Turley.

In Lower Manhattan, the availability rate slipped 60 basis points to 12.7% after the surprising snapping up of two big swaths of space that represented more than a half a million square feet, says Richard Persichetti, VP, research, marketing and consulting. Teach for America signed a 170,000-square-foot lease at 25 Broadway while Revlon will take 90,000 square feet at One New York Plaza.

Class A average asking rents increased $.30-per-square-foot to $55.28-per-square-foot while Class B rents rose $0.58-per-square-foot to $38.30-per-square-foot. Yet, Downtown is still a value play at an average $15 to $25 less per-square-foot than Midtown and Midtown South, he asserts.

“At the end of last year, it was looking like the availability rate was going to be high, like 17%, but then tenants were getting priced out of Midtown South and Downtown became the obvious place for them,” says Persichetti. “The price increases in Midtown South have helped Lower Manhattan, as well as subleasing all around Manhattan.”

Prices in Downtown don't appear poised to move out of their position as a value compared to other submarkets. "Current rates will stay in place, as long as leasing continues, until we see a 10% availability rate," he predicts. "If the residential market stays tight, that would help asking rents increase because it would mean taking more obsolete product out of supply."

In light of all the new construction though, a new trend could emerge in Lower Manhattan, Persichetti adds. "The older projects Downtown that could get converted to residential properties. I could see that happening in the next year or two."

Over in Midtown South, the availability rate stayed the same at 7.7%, with just 14,713 square feet of negative absorption, which was fueled by 55,984 square feet hitting the market at 275 Seventh Ave. Class A asking rents increased $1.13-per-square-foot to $72.23-per-square-foot in February while Class B rents are up $0.20-per-square-foot to $60.68.

Meanwhile, Midtown's availability dropped 10 basis points in February to 11% percent. The 166,508 square feet of positive absorption can be attributed mostly to the Penn Plaza/Hudson Yards submarket, the report states, where New York and Co.—the city's tourism arm—leased 178,000 square feet at 330 W. 34^th St. and Publicis Worldwide leased 114,000 square feet at One Penn Plaza.

A big story in the submarket is the Fifth/Madison section—which Cassidy Turley defines as the area between 48^th and 63^rd street that includes both sides of Fifth and Madison avenues, stretching as far west as mid-block between Fifth and Sixth avenues. That span is a major reason for Midtown's Class A average asking rent increase in February of $0.75-per-square-foot to $81.63-per-square-foot.

“We're seeing asking rents of $116 a square foot, that's close to historical highs,” says Persichetti. “It's because of trophy buildings, they're posting these rents.”