1271 Avenue of the Americas delivered with a 95.5% occupancy rate following comprehensive renovations/ Photo courtesy: Rockefeller Group
NEW YORK CITY—What's old is new. There's heightened demand for repositioned older properties in Midtown, according to JLL's Q2 2019 Manhattan Office Market report.
As one example, the brokerage and real estate advisory firm notes: “The fully repositioned 1271 Avenue of the Americas was delivered at an occupancy rate of 95.9%.”
It also highlights the appeal of new products with TimeWarner's $2.2 billion sale-leaseback with the Related Companies and Allianz for the 1.5 million-square-foot condominium at 30 Hudson Yards. In addition to this jumbo property deal, the report points out McCann Erikson renewed 450,000 square feet at 622 Third Ave. Plus although Colgate downsized, it still renewed 241,000 square feet at 300 Park Ave.
With 10 consecutive quarters of positive absorption of Class A office space, JLL points to steady demand with Manhattan's economic diversification in the creative and tech sectors. This helped offset new availabilities in office product. The borough's vacancy rate of 7.2% matched a post-recessionary low.
The report records Midtown South's experiencing a vacancy rate of 4.9%, down 30 basis points quarter-over-quarter. It highlights Yext's 142,500-square-foot sublease at 61 Ninth Ave. from Aetna. Following its acquisition by CVS Health, the insurance company's about-face in bringing its headquarters to New York City had left real estate watchers wondering what would happen at Vornado and Aurora Capital Associates' newly constructed Meatpacking District building. Flatiron Health also expanded to 122,065 square feet at 888 Broadway.
CBRE's CEO, New York Tri-State region Mary Ann Tighe said at one of her company's presentation earlier this year, “There is always a discount Downtown. Always.” The JLL report finds good deals continue to drive additional vacancy compression with diverse industries accounting for 1.0 million square feet of absorption Downtown in Q2 2019. It notes this district's vacancy compression rates decreased by 80 basis points quarter-over-quarter to 9.1%.
JLL states limited supply is anticipated for the next two years and possibly longer in both Midtown and Midtown South, with Downtown expected to experience continued vacancy compression.
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Betsy Kim
Betsy Kim was the bureau chief, East Coast, and New York City reporter for Real Estate Forum and GlobeSt.com. As a lawyer and journalist, Betsy has worked as the director of editorial and content for LexisNexis Lawyers.com, a TV/multi-media journalist for NBC and CBS affiliated TV stations in the Midwest, and an associate producer at Court TV.
