Midtown Manhattan has seen its share of corporate move-outs of late.

NEW YORK CITY—Corporate relocations out of Midtown to the west and southern section of the city as well as the movement by some major businesses to new construction projects Downtown or on the Far West Side could spell trouble in the years to come for Midtown property owners.

A newly released report by Newmark Grubb Knight Frank entitled “NYC New Trends” focuses on the potential issues facing Midtown with the prospect of numerous large blocks of space that have become or will become available in the not too distant future.

“There are at least 12 previously built Class A buildings (in Midtown) that already are, or in the next five years will become, more than 75% vacant due to relocations west and south,” the report states. “While commercial real estate is a constant game of musical chairs, the significant movement to new construction is a different variable, last seen in abundance during the 1980s.”

The brokerage firm notes that companies such as Time Warner, Conde Nast, L'Oreal, Twitter and KKR are following the trend of moving their operations to new construction.

New York City is poised to increase its office inventory by as much as 5.5% in the next 10 years fueled by an office construction pipeline of more than 25 million square feet. At least half of the new office product is scheduled to be completed in the next five years with most of the new development taking place Downtown and along the Far West Side of Manhattan. The report states that at present 30.5% of the space to be delivered in the next five years is pre-leased, leaving nearly 4 million square feet of space yet to be filled.

“With 69.5% of space left to lease in the new developments that are set to deliver between now an the early 2020s, odds are god that additional tenants will be pulled from traditional Midtown corridors, as Midtown South and Downtown have thus far accounted for a very small amount of the pre-leasing,” the report states.

The migration out of Midtown is not just limited to moves to new office product, Newmark Grubb Knight Frank states. Large blocks of office space in existing buildings in Midtown South and Lower Manhattan have been backfilled by Midtown tenants who are opting to relocate south, such as: Jones Day, Time, Inc., Hudson's Bay, Sony, Twitter, William Morris Endeavor, OSP, The College Board, Banco Santander, Harper Collins and Revlon. For companies that opted to relocate Downtown, they are paying rents in the $40 to $60-per-square-foot range as compared to the $70 to $90-per-square-foot they were paying in Midtown.

“Class A asking rents in Downtown Manhattan have increased 34.8% in the past three years, but remain 27.7% below the Midtown average,” the report states. “Downtown has re-emerged as a flight to quality and value.”

Another trend identified by the brokerage firm is that there should be a spike in availability in the Western Midtown district, specifically in the Sixth Avenue submarket, where Newmark is tracking 17 buildings with large blocks of space totaling approximately 10 million square feet that could become available in the next several years.

Some Midtown tenants are attempting to revamp their properties to appeal to the emerging TAMI (technology, advertising, media and information) sectors. The report concludes that with an aging office stock that currently averages 75-years-old, property owners will need to either develop new, upgrade old or convert obsolete office buildings as well as add new amenities in order to compete. A host of property owners are expending capital to reposition their assets, Newmark states, adding, “Such a competitive market will require landlords of large blocks to make hard choices necessary for upgrading their assets and setting themselves apart.”