NEW YORK CITY—Midtown is in trouble.
The submarket is fine in the short-term, but further out, the combination of market forces and infrastructure issues threaten the area's performance, RFR Realty president and CEO Gregg Popkin told a group ofbrokers and other industry professionalsWednesday at the monthly luncheon of the B'nai Brith real estate division.
"In Midtown South and Downtown, we are beginning to approach the 2008 peak in average asking rents but we have a ways to go in Midtown," he said. "Traditional TAMI, FIRE, apparel and law comprise about two-thirds of the area's occupancy. Short term, we're moderately optimistic. But things are about to change."
Referencing a presentation made jointly by JLL and CBRE to the industry, he continued, "There's about 5.8 million square feet of office space along Avenue of the Americas that's pending vacancy between now and 2020.
"This spells trouble in the future," Popkin declared. "JLL says the vacancy rate in Midtown could exceed 14% in the next few years, and I agree. So in terms of occupancy rates and rents in Midtown, storm clouds are on the horizon."
Part of the threat is coming from a dearth of new inventory, he noted.
"There have been no new buildings on Park Avenue since the 1980s and very few in Midtown on the whole, so new development is significantly constrained and our office stock is aging to the point of obsolescence," warned Popkin. "That creates many issues in terms of floor plates, HVAC systems, broadband access and many other features of these properties."
Ultimately, something has to change, and Popkin had suggestions. "To remain competitive, new buildings must be developed in Midtown. In addition, more transportation is needed."
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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.
