Despite a low availability rate, Manhattan’s East Side office submarket saw asking rents drop last year while prices in surprising niche neighborhoods such as Hudson Square are booming.
In fact, asking rents are now higher in Hudson Square, and the explanation, according to CBRE executives, is that office leasing is no longer about “location, location, location” as much as it is about product.
While the East Side finished 2014 with Midtown’s lowest availability rate, 7.4 percent, it was the one sub market that actually saw asking rents decline, according to a presentation Mary Ann Tighe, CEO of CBRE’s New York Tri-State Region, and vice-chairman Peter Turchin gave this morning at the company’s headquarters at 200 Park Ave South.
Asking rents dropped $0.87 to $61.74 per square foot year-over-year, while prices in Hudson Square, an area Turchin said was traditionally the “lowest hanging of the fruit in the Midtown South market,” climbed $13.37 to $71.45 per square foot during the same period.
“It’s not because of where Third Avenue is,” he said, explaining tenants are more concerned these days about the style of a building rather than its location. “It’s about what it is.”
Tighe said that while architects have “solved the puzzle” of how to transform pre-war buildings in to cool, trendy spaces desirable to office tenants, they haven’t discovered the key for the kinds of mid-century modern properties that dominate areas like the East Side’s Third Avenue.
“And the most dramatic illustration of that is Third Avenue has pretty damn impressive transportation” she said. “Hudson square, not so much. You’ve got one subway line coming in and look at the difference in demand and pricing between the two.”