Large blocks hit market in Midtown South

Former Ring building one of a flurry of spaces listed amid tight leasing climate

May.May 01, 2014 07:00 AM

Commercial Market ReportThe office-leasing market in Manhattan remained strong last month, with the average asking rents rising in all submarkets, even as the availability rate ticked up in Midtown South as landlords made several large blocks available, including the Kaufman Organization listing the first of four former F.M. Ring Associates properties.

“Overall it is very active,” said Joseph Harbert, president of the Eastern Region for commercial firm Colliers International. “Large tenants are out there in force. Prices for Midtown South are heading to new highs unforeseen even a year ago. [And] Sixth Avenue is starting to absorb the blocks that we were all concerned about a short six months ago.”

Even so, not all the areas were equal, he noted: “Grand Central is lagging a bit.”

The average asking rent in Manhattan rose by $1 last month to $64.59 per square foot compared with March, while the availability rate fell by 0.1 points to 11.3 percent, figures from Colliers showed.

Midtown

Click to enlarge

Click to enlarge

A large block of space hit the Midtown market in the iconic Chrysler Building last month, according to information from leasing database CoStar Group.

The building, at 405 Lexington Avenue between 42nd and 43rd streets, is owned by landlord Tishman Speyer. The block of floors from the seventh through the 10th was listed as available, with a total of 145,813 square feet, CoStar figures showed. There was no asking rent listed on CoStar, but a nearby floor in the building had an asking rent of $62 per foot, below the Midtown average.

The average asking rent in Midtown continued its steady rise last month, increasing by 91 cents per foot to $74.40 per foot in April, compared with $73.49 per foot in March, Colliers data showed. The availability rate declined by 0.2 points to 11.6 percent.

Midtown South

A flurry of large blocks of space hit the tight Midtown South office market last month, especially near the Flatiron District, CoStar data revealed.

One of the most highly anticipated was the former F.M. Ring Associates building at 119 West 24th Street, which Extell Development purchased last year and then earlier this year net leased to the landlord Kaufman Organization.

The 14-building Ring portfolio was kept mostly vacant for years, with brokers griping that they could lease tenants at the locations if only ownership would strike a deal, before Gary Barnett’s Extell won control. Now, with four of the properties controlled by Kaufman, they have their first chance.

The entire 12-story building is vacant and will have about 130,000 square foot of office space available around August, said Grant Greenspan, a principal and head of leasing with Kaufman. The asking rent is $65 per square foot.

Kaufman is looking for one or two large tenants to anchor the building with about 50,000 to 70,000 square feet — one will win naming rights and its own lobby and elevator. Kaufman plans to lease up the balance of the building with full-floor tenants, Greenspan said.

“We sent an email blast [in mid-April], and the response was enormous,” Greenspan said. He said his building will likely have a slight price advantage over other larger properties with sizeable listings on Park Avenue South and nearby.

For example, TF Cornerstone’s 387 Park Avenue South added more than 98,000 square feet to the market last month in the 218,000 square foot building at 27th Street. There the asking rent is in the “high $60s” in the upper floors, said leasing broker Matt Leon, an agent for the property and an executive managing director at Newmark Grubb Knight Frank.

The building has a roof deck and the plan is to lease the top three to five floors to a single tenant, Leon said.

The response from brokers and tenants has been strong there, as well, and he’s been hearing from companies in fields such as financial services and social media.

In addition, about 400,000 square feet was added to the market within the 511,700-square-foot 225 Park Avenue South at 18th Street, owned by Orda Management, as the Port Authority of New York and New Jersey prepared to relocate to 4 World Trade Center in Lower Manhattan.

The competitive market in Midtown South continued to push asking rents up. Last month, asking rents hit $56.15 per foot, up 62 cents per foot, from $55.53 per foot in March. However the flurry of newly listed large space drove up the availability rate to 9.2 percent, from 8.8 percent in March, the Colliers figures showed.

Downtown

The availability rate fell sharply in Lower Manhattan last month, as large blocks of space were leased in several buildings, including 1 New York Plaza and 250 Vesey Street. But smaller deals as usual dominated leasing activity, and also helped push down the availability rate.

The social media analytics provider SumAll inked one of those modest-sized leases at 123 William Street, a 569,100-square-foot office tower that East End Capital Partners and GreenOak Real Estate purchased in October for $134 million. The social media company is growing, and has secured $14 million in funding, a company spokesperson said.

SumAll, represented by CBRE Group’s David Young and Lindsay Godard, is more than tripling in size, moving to 12,800 square feet at 123 William, which is located between John and Fulton streets, from 3,000 square feet in 247 Centre Street in Little Italy, the spokesperson said. The rent was not disclosed, but asking rents in the tower range from $36 per foot on the lower floors to $50 per foot on the upper floors.

The availability rate in Lower Manhattan fell sharply, dropping by 0.6 points to 13.8 percent in April, down from 14.4 percent in March, the Colliers data revealed. In addition, following the pattern in Manhattan’s other markets, the average asking rent rose sharply. It was up by 74 cents per foot in April to $50.99 per foot.

“Downtown is seeing absorption and prices rising,” Colliers’ Harbert said.


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