Gatsby Enterprises to buy Midtown office property for $50M

Gatsby Enterprises is snapping up a 66,000-square-foot office building in Midtown for $50 million, banking on significantly higher rents as existing leases expire in the next few years.

Seller Valeray Real Estate Company’s 17-story office building at 56 West 45th Street is fully leased, Crain’s reported. However, 60 percent of the space is due to become vacant in the next three years, which could allow the new owner to hike up rents. Much of the building’s rents are in the high $30s per square foot, according to the publication.

“There’s room to charge rents in the $50s and $60s per square foot at a building like 56 West 45th Street,” a source told Crain’s. “There are lots of tenants looking for space in that price range.”

Bob Knakal of Cushman & Wakefield brokered the deal on behalf of the seller.

New office supply is coming onto the market in other parts of Manhattan, and Midtown has been losing its competitive edge over the past few years.  Midtown East, for example, is taking a hit as companies sign up for office space in the Hudson Yards District.

Tenants took more than 33 million square feet of Manhattan leasing space in 2016, pushing leasing activity up over 5.5 percent over 2015, according to a recent Colliers International report. The average asking rent in Manhattan was $73.24 per square foot at the end of 2016, up from $71.50 a foot the previous year. [Crain’s] — Miriam Hall