James Emden, a vice chairman at Colliers International, signed up a tenant last month looking to relocate into about 15,000 square feet. The tenant, Job Path, a nonprofit that assists the developmentally disabled in finding jobs, has a lease at 22 West 38th Street that does not expire until early 2012, but decided to start looking now to take advantage of the current low prices.
“If you can find them space that is almost built to their specifications, the cash up front on the free rent can offset the cost of the overlapping rent,” he said.
Although asking rents in Midtown have risen slightly in the past few months to $54.93 per foot, they are still down about 36 percent from the June 2008 peak of $86.57 per foot, CBRE figures show.
Emden said his tenant was looking in buildings on the West Side of Midtown, including a building he would not identify on 34th Street. Two years ago, a tenant would pay up to $60 per square foot there, but today rents are in the mid-$30s, he said.
“There are tenants in the market today that are going from [Class] C buildings to [Class] B buildings,” he said. “They want to upgrade … and they want to do that in 2011, before prices begin to go up by $5 or $10 per foot.”
Creative and marketing firms are the main tenants in the onetime loft buildings that dominate the office rental stock in Midtown South. In August, the top deal in the district was the renewal and expansion by theater organization Collaborative Arts Project 21, which leased 32,000 square feet at 18 West 18th Street in the Union Square submarket.
Last month, marketing firm Sopexa USA, which promotes French food and wine in the United States, inked a relocation deal for about 6,000 square feet at 250 Hudson Street in Hudson Square. The firm will move to the Jack Resnick & Sons-owned building from 7,000 feet at 80 Maiden Lane.
Dennis Brady, Resnick’s executive managing director of leasing, said the 27,000-square-foot seventh floor, which Sopexa is moving to, was segmented after a lease for 15,000 feet was signed last year. Since the start of the year, he said he’s shown the remaining space three or four times a week.
“That market [Hudson Square] has improved in our opinion since the first [of the year], but not dramatically,” he said, noting that landlords are giving less free rent. He said Sopexa’s final rent was in the low $40s per square foot.
“We were able to downsize from a more traditional office-intensive environment to a much more collaborative office space,” said Robert Goodman of Colliers International, who represented Sopexa. In doing so, the firm was able to cut down on the square-foot usage per person.
The Downtown market has struggled for most of 2010. There was only 130,000 square feet of new space leased in August, the slowest month since September 2009, when just 100,000 square feet was leased.
Yet, as some buildings have carved up full floors, others are consolidating them to create large floor plates.
Late last month, the entire 11th, 12th and 14th floors at the 1 million-square-foot tower at 14 Wall Street, owned by Capstone Equities, were listed as available for occupancy by 2012, and could be combined to form a 108,000-square-foot block, data on CoStar shows.
Bradley Gerla, executive vice president at CBRE, who with Howard Fiddle is representing the tower, said consolidating floors in the old Bankers Trust Building was a better strategy than leasing partial floors. The floors are currently occupied by a number of smaller tenants, most with leases expiring at the end of next year.
Asking rents were not available for the listing, but entire floors higher up in the building had asking rents between $38 and $39.50 per square foot, CoStar shows.
“We feel our success has been with the full floors,” said Gerla, who added they have entire floors leased to architecture firm Skidmore, Owings & Merrill and TheStreet.com.