Midtown office rents hit highest mark since crash: report

By Guelda Voien | November 12, 2013 12:01AM

Average Class A office asking rents in Midtown Manhattan hit their highest point since the downturn in 2008, according to the October market report from commercial brokerage Cassidy Turley. While the rents inched up only ever so slightly – up 1.6 percent from $77.21 to $78.57 per square foot over the previous month – the fact marks an important milestone in the Manhattan office market’s recovery, which has been decidedly variegated and much slower than that of the residential market.

“Previously, it’s been back and forth” in Midtown, said Richard Persichetti, head of research for Cassidy Turley. “This proves the demand is still there and [tenants] are actually making some decisions.”

Six leases over 100,000 square feet had been signed in the month of October alone, he noted, and he said he expected ten more such deals will be inked before the year’s end.

Midtown, the priciest market in Manhattan and home to many of the more attractive addresses globally, such as those along Park and Fifth avenues, has recently been buoyed by renewed leasing by smaller financial firms, such as hedge funds and private equity shops, as The Real Deal has reported.

Within Midtown, the West Side fared best, with vacancy in Times Square and Columbus Circle lowest of any Midtown submarkets, both at 6.2 percent, down from 10.2 and 10.1 percent last year at this time, respectively. Rents were also up — 13 percent, from $68.84 to $78.39 per square foot year-over-year in Times Square and 10 percent, from $60.80 to $67.10 per square foot, in Columbus Circle.

Propelling the slim availability in the Columbus Circle region was the nearly 250,000 square feet that Universal Music Group signed for at Jack Resnick & Sons’ 1755 Broadway, at 56th Street. The renewal means the music label will stay put until 2028, published reports show.

The Grand Central submarket had the highest vacancy in October, at 15.5 percent, although average asking rents were $61.61 per square foot, up 9.6 percent from $56.19 per square foot last year in the same period.

In Midtown South, availability grew to 9.2 percent in October from 8.5 percent in September and from 7.9 last October, but the market remained Manhattan’s tightest. The boost in available space can mostly be attributed to three buildings from the imperiled F.M. Ring portfolio formally hitting the market, the report says: 212 Fifth Avenue, 119–125 West 24th Street and 251 Park Avenue South.

Average asking rents were $62.62 in Midtown South, up a whopping 18 percent from $52.11 last October.

In a reversal of the situation in Midtown South, the Downtown market saw vacancy slip, though it remains the highest of any Manhattan market at 13.1 percent.

The World Trade Center submarket was in the worst shape in October, the report says, with 14.7 percent vacancy and average rents at $57.49 – the highest of any submarket Downtown, which might be part of the problem. Worse still, October’s numbers don’t include the million-square-foot 4 World Trade Center, which is coming on the market this month.

“Downtown’s availability has been a rollercoaster,” Persichetti said, but come November, “we’re going to see [availability] go up even more.”