For a brief moment in time three years ago, pricing in the Midtown South office submarket surpassed Midtown when asking rents climbed to the top for two consecutive quarters.
That’s happened again this year, but the difference this time around is that the Midtown South market is now nearly twice the size it was back then.
The area’s Class A office market is now the “most expensive major market in the nation,” JLL director of New York research Tristan Ashby told the Wall Street Journal.
“In the last few years there has been a lot of renovation and new construction,” he added. “While the expansion of Manhattan’s tech industry is responsible for much of the gain, newer and updated product has also driven rents higher.”
The average asking rent for Class A office space in Midtown South – the neighborhoods south of 30th Street and north of Canal Street – was $83.19 per square foot in the third quarter and $81.67 in the second quarter, according to JLL.
In Midtown it was $81.91 in the third quarter and $81.19 in the second quarter.
Since 2013, Midtown South has added about 14 million square feet of office space, growing about 90 percent to 28.8 million square feet.
By comparison, Midtown has about 193 million square feet of prime office space, but even its premier districts are lagging behind trendier ones further south.
Asking rents in the Plaza District, which has about 86 million square feet, averaged $88.23 per square foot.
The two most expensive neighborhoods in Midtown South, which each had about 6.5 million square feet of Class A office space, are Greenwich Village and Hudson Square, which had average asking rents of $104.60 and $91.89 per square foot, respectively.
Midtown is “losing its competitive advantage at this moment in time,” said David Levinson of L&L Holding, which was on the forefront of the Midtown South trend when it redeveloped 200 Fifth Avenue in Flatiron several years ago.
Even finance firms that have traditionally stuck to Midtown are heading south to be closer to clients.
“This is just a moment in time,” Levinson added. [WSJ] – Rich Bockmann