Asking rents plunged for some of Midtown’s top landlords last year as they competed for the few tenants searching for space in a weak leasing market, but their reductions helped keep their vacancy rates below the market average, experts said.
The family-owned Durst Organization dropped its asking rents to $60.82 per square foot in November 2009 from $113.15 per square foot in August 2008, near the pricing peak of the leasing market, according to the most recent data available on Midtown’s top 10 landlords from commercial services firm CB Richard Ellis.
The Real Deal compared data from August 2008 to November 2009 for the top 10 landlords in Midtown ranked by square feet owned.
The 46 percent decline was the steepest among Midtown’s top 10 landlords, who control 93 million square feet, or about 41 percent of the market.
Landlord and tenant leasing broker Cynthia Wasserberger, a managing director at commercial firm Jones Lang LaSalle said the landlords cut prices to attract tenants and keep their buildings filled.
“I think all the landlords got aggressive. They were pretty swift in their decision to respond to the market,” Wasserberger said.
The dramatic response by Midtown’s leading office building owners to cut their asking rents by as much as 46 percent in 15 months reveals the breadth and intensity of the market slide. The average decline among the landlords was 30 percent, to $60.88 per square foot.
During the same period, the average direct asking rent for all of Midtown’s property owners declined by 33 percent to $59.90 per foot in November 2009 from $89.44 per square foot in August 2008, CBRE data reveals.
On the other hand, several of Midtown’s top landlords barely budged in their asking rents, such as Fisher Brothers and Rudin Management, the figures show.
But at the same time, the statistics reveal the relative strength of these property owners to keep their buildings occupied. The top landlords had a lower availability rate in Midtown of 7.9 percent compared to the overall average, which reached 10.3 percent in November last year, the data shows.
The greatest increase in availability among the top 10 firms between August 2008 and November 2009 was in the Rudin Management portfolio, which rose steeply from the lowest availability rate of .4 percent to the fourth highest availability rate, of 8.8 percent.
One of Rudin’s Midtown properties, 345 Park Avenue between 51st and 52nd streets, has an availability rate of 18 percent, data from CoStar Group shows.
The only portfolio to see things improve in both availability and vacancy rates was W&H Properties, the landlord for the Empire State Building at 350 Fifth Avenue and 60 East 42nd Street, two buildings that have been aggressively marketed over the past year.
The availability rate for W&H Properties dropped to 16.7 percent in November from 19 percent in 2008. The company, through a spokesperson, disputed the total square feet in CBRE figures, saying it had more than 8 million square feet in Midtown in the nine properties, not 6.9 million, as the chart above shows.
David Hoffman, executive managing director of Colliers ABR, to be renamed Cassidy Turley next month, cautioned that asking rents may not tell the whole story, in part because landlords are not publishing the asking rents and because final accepted rents may be far lower.
For example, while Fisher Brothers did not lower its asking rent of $86.69 per square foot between August 2008 and November 2009, the company did lower rents to meet the market in deals, Hoffman said.
“I know they have been very competitive in retaining existing tenants and procuring new ones,” he said.
Jordan Barowitz, a spokesperson for Durst, said it was unfair to compare asking rents from 2008 with those of 2009.
“It’s an apple to oranges comparison. Last year we had higher-rent space on the market than we do this year,” he said in an e-mail. “In addition, our vacancy rate crept up by .6 percent to 3.3 percent, meaning that all of these numbers are virtually meaningless as they represent a tiny fraction of our portfolio.”
The real estate investment trust SL Green Realty, Manhattan’s largest commercial landlord, cut its asking rents by 25 percent from August 2008 to November 2009, while its portfolio’s availability rate rose to 9.4 percent from 6.1 percent, the figures show.
A company spokesperson said in an e-mail that the REIT initiated rent cuts before other commercial entities did so.
“SL Green began dropping rents in 2008 in advance of the market. We think rents have largely stabilized now and expect to see concessions tighten as 2010 goes on,” a company spokesperson said in an e-mail.
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