The industry mantra has been for months now that the Downtown office market is red hot, but the latest market statistics paint a more nuanced picture.
Indeed, the average office building asking rent in Lower Manhattan was flat over the past year — even as rents jumped significantly in Midtown South and, to a lesser degree, in Midtown during the same period, according to new data from commercial firm CBRE Group.
In December, the average asking rent Downtown was $46.37 per square foot, down by almost 1 percent from December 2012’s $46.85. By comparison, average asking rents in Midtown South rose by a heady 17.1 percent to $64.58 per foot, a record for the market.
And in Midtown, average asking rents jumped by 7.4 percent, to $72.85 per foot – the highest level since June 2008, when rents were $74.76 per foot. The figures were released as part of CBRE’s fourth quarter media briefing, held this morning on the vacant 50th floor of Silverstein Properties 4 World Trade Center.
Rents in Midtown South and Midtown were driven by increased office leasing demand. In Midtown South, tenants inked 7.8 million square feet of deals – both for new spaces and renewals – up from 6.1 million square feet in 2012. Meanwhile, in Midtown, 21.8 million square feet of deals was inked last year, compared with 21.1 million square feet in 2012, the CBRE data shows.
Lower Manhattan wasn’t as lucky. Tenants there signed 6.9 million square feet of space in 2013, down slightly from the 7 million square feet leased the prior year. Nonetheless, CBRE and other firms say there are large office leasing deals in the pipeline, including many that involve tenants relocating from Midtown.
“Some new leases that will be signed in the first quarter of 2014 will also demonstrate the commitment of industries that have never located Downtown that will be making big commitments. These are big brand names, international brand names, that give us in the brokerage community tremendous excitement,” Bruce Surry, an executive vice president with CBRE, said.
And, even as the pricing Downtown remained flat, investors were snapping up office buildings such as 180 Water Street, 140 West Street and 49-51 Chambers Street, to possibly convert them to residential units, further limiting office supply.
The sales do not all impact leasing statistics. That’s because not every building in Lower Manhattan that’s slated for conversion is included in the statistics CBRE uses to determine availability and vacancy rates. The firm estimates that about 860,000 of the 83 million square feet of existing Downtown office space will be removed from its tallies after being converted from office use.