Side streets are the new main streets in NYC office market

TAMI tenant appetites pushing up demand, rents for prewar buildings

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.

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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