The Real Deal New York

Manhattan office rents saw biggest decline in 3 years: Colliers

Plaza District landlords lowered pricing on big blocks
By Rich Bockmann | November 08, 2017 12:50PM

From left: Sheldon Solow and 9 West 57 Street, Edward Minskoff and 590 Madison Avenue

Manhattan office asking rents in October saw their biggest monthly decline in Three Years As Prominent Plaza District landlords lowered pricing on some of the city’s ritziest trophy towers.

Average asking rents dropped 1.2 percent to $72.03 in October, according to Colliers International. That was the biggest monthly drop since May 2014.

Asking rents fell as landlords lowered pricing on some big blocks of available space in prominent buildings, such as Edward J. Minskoff’s 590 Madison Avenue and Sheldon Solow‘s 9 West 57th Street, one of the city’s most expensive office buildings, where rents can reach up to $200 per square foot.

Franklin Wallach, managing director of Colliers’ research group, said Solow lowered pricing by about $25 per square foot on a roughly 250,000-square-foot block of available space at 9 West 57th Street, the iconic Skidmore, Owings & Merrill building whose curved façade overlooks Central Park.

“It’s the first time in several years that I’ve heard of an adjustment in the asking rent there,” he said.

Solow’s long kept large blocks of space empty at the office tower, part of a strategy of only leasing to premiere financial firms willing to pay top dollar as a way of maintaining the building’s cachet. But the property will be losing some of its biggest tenants when the private equity firms KKR and Silver Lake relocate to Hudson Yards.

And overall, Plaza District landlords are facing more available space in the future as other firms like BlackRock relocate.

Boston Properties recently lowered pricing on a large block at 399 Park Avenue, as did the Paramount Group at 31 West 52nd Street. Elsewhere, large blocks of sublease space at 237 Park Avenue, the Starrett Lehigh Building and 75 Varick Street also contributed to pulling down Manhattan’s average asking rent.

Asking rents for the Midtown trophy towers favored by hedge funds still haven’t reached their pre-recession peak, and are landlords are under more pressure to offer higher concession packages that have tripled in cost since 2008, according to a recent report by JLL.