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Midtown's strength also can be seen in absorption, notes Kuriloff. “In the second quarter, Midtown accounted for 38% of the total leasing in Manhattan, the largest amount of absorption of all US CBDs that we track.”

Adds Avison Young principal Greg Kraut, “As Midtown South starts to get pricey and Downtown ticks up, we're seeing some good activity in areas like Midtown East, along Third and Lexington avenues. The supply has gone down about 200 basis points over the past six months and—looking toward Midtown West—you're seeing a lot of tenants going to the Penn Station market.”

Tenants have their sights set on Midtown East too, notes Ashlea Aaron, leasing manager at the Durst Organization. “In Midtown East, we've leased 100,000 square feet in the past five-and-a-half months.” The firm has just completed leasing at 733 Third Ave. and is closing in on full occupancy at 655 and 675 Third Ave.

Also in Midtown East, developers and landlords can thank SL Green Realty Corp. for its ambitious One Vanderbilt project in the Grand Central Terminal corridor. The plan has as its linchpin a $220-million investment in public infrastructure that will include the construction of new, direct subway access points and circulation areas, easing platform and mezzanine crowding and allowing trains to move more quickly through the station at peak hours. SL Green also intends to build a 63-story, 1.6-million-square-foot class A office tower just west of Grand Central as part of the development.

Adding to the appeal of the project is the fact that the developer has secured TD Bank as a large anchor tenant. The financial firm has signed a long-term lease for 200,000 square feet at the tower.

“It's a fabulous commitment to Midtown and the Grand Central area,” says Bob Tunis, vice chairman. “It's a very significant endorsement that could be a precursor to a lot of activity.”

The driver of Midtown's joy ride has surprised the market. “FIRE [finance, insurance and real estate] is back in New York City leasing,” declared Joe Harbert, eastern region president of Colliers at the firm's Q2 briefing this summer. “The sector and professional service firms comprised 20% of the market. It's not all about TAMI [technology, advertising, media and information].”

In fact, adds Kuriloff, “Financial services has added about 20,000 jobs in the past eight quarters as some of the banks, hedge funds and private equity firms like the Carlyle Group and Blackstone have started to grow and hire people. We believe this trend will continue, as most economists believe a rising interest rate means strong performance for banks. “

Financial services' improvement, plus the continued growth of the TAMI sector, has pushed landlords into action. And the renovations aren't tweaks, they're wholesale redevelopments designed to appeal to the modern tenant.

“We created an environment to appeal to millennials,” asserts Durst's Aaron. “Our past two deals were in prebuilts and we've been changing those to include an open pantry and high ceilings.”

Durst also is creating setbacks at many of its properties to provide outdoor space. “Next on our list for an upgrade is 675 Third Ave. and we're going to look at how we can create an open area with seating to offer an environment that people will want to be in,” Aaron notes. “We're doing this in a majority of our buildings on the West Side: we'll put in 10,000 square feet of terraces at Four Times Square and at 1133 Sixth Ave., we'll activate a 7,500-square foot setback on our second floor.”

Adds Tom Bow, SVP of leasing at Durst, “When you can create a space where people can step outside for a short period of time to think or have a conversation in a different environment versus an office or conference room, it's a live-work-play opportunity.”

“That's incredibly appealing to millennials,” Aaron notes. “Activating these outdoor spaces and having these amenities does have long-term benefits throughout the portfolio because statistics forecast a major growth of millennials in the labor force in the coming years.”

RXR Realty is in the midst of ambitious makeovers, with millennial workers in mind, at two of its Midtown office properties. “We're in the final phases of an approximately $50-million renovation of 237 Park Ave. and we're midway through a $150-million redevelopment of 75 Rockefeller Plaza,” says Bill Elder, leasing director.

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Among other changes at the former property, RXR is working to convert the overall atmosphere of the building—initially developed in the 1970s—from a dark space into one with more light, air and clean finishes. The firm also is bringing in new retail stores and eateries. “Millennials aren't looking for McDonalds; they're looking for healthier options that are local, chain-oriented businesses. That's something they require.”

At 75 Rock, RXR is working to make the building LEED certified and offer more efficient floor plates. The firm will be rewarded for its efforts. “We expect rents in the low- to mid-$70s to low- to mid-$80s at 237 Park and the low $80s to low $100s at 75 Park,” says Elder.

Meanwhile, at a gathering of NAIOP's New York City chapter earlier this year, Robert Lapidus, president and CIO of L&L Holdings, spoke about the company's plans for 390 Madison Ave. while Robert Jackson, EVP of the Rockefeller Group, spoke about the revision of the Time-Life Building, at 1271 Ave. of the Americas.

“The excitement today is in Midtown South and Downtown,” admitted Lapidus. “So what you have to do in Midtown is take these commodity buildings and create something fresh.”

L&L is doing just that with the “commodity space” it holds at the corner of 47th Street, he said. “We plan to demolish several floors and we're restacking the building to create some floors with double and triple heights as well as re-create the exterior, the outdoor space and the retail so there will be an amenity that's special and unique for every floor.”

He continued, “Retail on Madison Ave. in the 40s is pretty boring—you can buy a men's suit and do some banking, but that's about it—so we wanted to create something that'd stand out. The design is modeled after Alice Tully Hall [at Lincoln Center] and we envision an Eataly-type concept for the building that creates some vitality for the space and the neighborhood.”

Within the office space at the building, Lapidus said, “we created a big column-free space that can be used for a town hall, a trading floor or other uses. We want to give tenants options.” The company also created a private lobby that could be used by a smaller tenant.

Meanwhile, in the iconic Rockefeller Center area, Sixth Avenue's Time-Life Building is headed for a more than $300-million restoration now that Time Inc.—the primary tenant—is vacating the building in 2017. The refurbished tower is slated for delivery the following year. “We wanted to modernize while building on the asset's location, its large floor plates and the numerous amenities in the area,” said Jackson. “With the building being vacated, we had a one-time opportunity to rejuvenate the property for future years.”

Windows and the building's façade will be replaced, creating 50% more light in the building, allowing for the creation of function space and perimeter offices, he noted. The change—along with an elevator upgrade that will turn the building from a single-tenant enabled tower to one that can host several companies—creates the flexibility to host various types of tenants, he said.

Farther west, Brookfield Property Partners revealed plans in February 2014 to redevelop 450 W. 33rd St. and connect it to the firm's larger Manhattan West complex in a $200-million project. At the time, Brookfield CEO Dennis Friedrich revealed that the company expected the building to command average asking rents of $60 to $70 when the restoration is completed in 2016, according to Real Estate Forum sister publication GlobeSt.com.

However, Brookfield EVP of asset management Sara Queen tells Forum, “We've done deals in the mid- to high $70s; the market has definitely improved since we started, commanding rents in the high $80s to $110-per-square-foot range.”

But it's not just market shifts that have prompted the average asking rent spike, she notes. The renovations also cater to exactly what new office space users require.

“As we talk to tenants, one of their biggest concerns is recruitment and retention, so they're thinking about millennials.” Further, Queen notes, “You don't have to be a millennial to enjoy open space, TAMI tenants are especially attracted to open space because of the higher ceilings.”

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Slated to offer over 100,000 square feet of contiguous space on some floors, “the building's large space also creates the ability to emphasize open space with features like a climbing wall because of the high ceiling or a jogging track along the edge. You can use the space in an interesting way. We're seeing skateboard runs, climbing walls; there are a lot of fun possibilities.”

Asserts Kuriloff, “Today's companies—like Google and Apple—are not manufacturing widgets, they're producing ideas. That requires collaboration among different disciplines and expertise, which is much easier to do in an open office. That's what every company is looking for; it leads to innovation.”

Following all of the redevelopment, Kraut anticipates a pendulum shift in favor of Midtown landlords, he notes. “As the market gets tighter, free rent and tenant improvement concessions will go down or not rise as rapidly. It's all about supply and demand and most landlords have a bullish tone for the next couple of years.”

East End Capital founder and managing principal Jonathan Yormack has a slightly different take—though he's not in complete disagreement. “The vacancy rate across the city has continued to tick down and usually after it hits the single digits, we start to see non-linear growth, such as a jump. That can rise quickly by as much as $5 per square foot, and certainly the market has the right dynamics for that.”

However, he contends, “I don't think we're at the point yet where you'll see rents go up and concessions drop. We will see pullbacks in free rent and then concessions may go down later. But yes, landlords have invested in their buildings in anticipation of rent growth, they're well positioned to take advantage of opportunities to backfill their vacancy.”

Adds SL Green's Tunis, “There's no question that Midtown landlords are going to ask tenants for high rents because these redesigned buildings are essentially new construction. Many of them are good properties that will have improved infrastructure, and the property owners have held those assets for many years so they have a low cost basis and can afford to put more money into their buildings.”

Even with higher rents, Midtown can practically sell itself, asserts Chris Macke, managing director of research & strategy at American Realty Advisors, “Midtown is like the ultimate bazaar of options for people to experience life. Rather than just a few choices, you have a number of them—in terms of dining, entertainment and more—and there's such a wide variety. It's a more vibrant experience and intellectual capital wants to be stimulated.”

And Manhattan's other two submarkets need not worry about being usurped by Midtown, he adds. “Net net, Midtown's gains are good for Manhattan as a whole. The stronger Midtown is, the stronger the whole ecosystem will be.”