NEW YORK CITY—An industry analyst is forecasting a possible decline in average asking rents on sixth avenue and along the side streets stretching from 42nd to 59th streets. Savills Studley chief economist Heidi Learner says in a new report that in light of expected tenant relocations from the area and some space having sat idle for some time, availability rates may trend upward, forcing landlords to get creative in marketing their space.
“In the absence of activity—given upcoming lease expiries and tenant relocations—Sixth Avenue will see an increase in availability rates,” she tells GlobeSt.com. “If that happens, the balance of power really will shift in favor of the tenant. We could see higher tenant improvement allowances, free rent for a certain number of months, or downward pressure on rents is another possible outcome.”
According to Learner, the area's current availability rate is 12.4% and that could rise to 13.6% because of several blocks of space “becoming vacant over the next seven to nine quarters. Additionally, several moves out of the area could push the availability rate into the high-teens.”
Two large blocks of space at 1301 Ave. of the Americas may be available upon lease expiration in May, 2016: about 90,000 square feet on floors 34-36 and 125,000 square feet on floors 41-45. Meanwhile, two large blocks may become available when current leases there expire in the fourth quarter of 2016. About 210,000 on floors 26-30 and 84,000 square feet on floors 46-47 will be vacated, according to Savills' research.
Additionally, Learner notes, “we have a few tenants that have announced they're going to move. Time Warner is leaving 1271 Sixth Ave. to go to Hudson Yards and is taking HBO with it.” The former firm has just under 1.9 million square feet at 1271 while the latter firm, which is an entity of Time, has 700 employees spread across 1100 Sixth Ave. and 1114 Sixth Ave. “Those leases are not up until December 2018 but this is probably the right amount of lead time for a landlord to think about finding a new tenant.”
Before landlords offer rent breaks or funding for build-outs, they're already trying one other measure to lure tenants: renovation. One is underway at 1271 6th Ave., Learner notes.
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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.
