The Real Deal New York

Side streets are the new main streets in NYC office market

TAMI tenant appetites pushing up demand, rents for prewar buildings

December 08, 2015 06:30PM

463 Seventh Avenue

Revamped lobby at 463 Seventh Avenue in Penn Plaza (inset: David Levy)

There’s been a shift in the city’s commercial real estate market in recent years, and it’s been a boost for landlords at side-street buildings — while simultaneously a bane for those who own office buildings on the city’s main drags.

Much-discussed TAMI tenants, including tech startups and media companies, that are increasingly driving the city’s office market are moving toward prewar buildings, and its meant some side-street Flatiron District buildings are garnering higher rents than larger, more available Penn Plaza properties.

It’s a problem for landlords like Adams & Co., which poured money into its building at 463 Seventh Avenue near West 35th Street – creating a new lobby, adding a new cooling tower, upgrading elevators and buying new operable windows, according to the New York Post.

But the company can’t move a large, 95,000-square-foot sublease on the building’s 16th through 20th floors – including spaces ranging from 16,750 suqare feet to 21,750 square feet – despite being able to cut a deal in the mid-to-high-$40s per square foot.

Not only has the office leasing market been slow north of 28th Street, according to Adams & Co. principal David Levy, but non-fashion buildings in the Flatiron District are seeing rents “they never dreamed of” – in the $60s per square foot even for side-street buildings.

The Chelsea and Flatiron District market has boomed over the past few years, and this year saw the Kaufman Organization go on a ground-leasing spree in the area – acquiring the long-term leases on several former Ring portfolio buildings from Gary Barnett’s Extell Development, as The Real Deal reported.

Rents at those buildings – which Extell recently sold to Edison Properties, as The Real Deal also reported – now run in the mid-$60s to mid-$70s. [NYP]Rey Mashayekhi