The American Red Cross put its entire 126,000-square-foot New York headquarters at 520 West 49th Street, between 10th and 11th Avenues, on the market for lease late last month.
Listing brokers Janet Woods and Ellen Herman, executive vice presidents at property firm Jones Lang LaSalle, declined to comment on the deal, as did the Red Cross. Asking rents were not published.
The nonprofit organization may have difficulty attracting a tenant, however. Demand for Far West Side office space has dipped since the downturn, said Lance, who is not the broker on the Red Cross building.
“In the current climate, there are a lot more established buildings [in the center of Midtown] with attractive pricing,” he said. “That reduces the incentive for people to lease over there.”
Theodore Koltis, a senior vice president at the Paramount Group, said that in the firm’s large portfolio of office buildings in Manhattan, rents are up but have not equaled the peak years.
He pointed to a deal last month at Paramount’s 515,000-square-foot building at 900 Third Avenue, where Shiseido Cosmetics America took additional space in the lower portion of the building priced “in the low $50s” per square foot.
“Six months ago, you would have been struggling to break $50 [per foot],” Koltis said. On the upper floors of the building, the firm is now negotiating in the mid-$60s per foot, he said, but that’s still shy of the market’s peak of roughly $80.
Pricing in parts of Midtown is still enough of a discount from the peak to attract tenants from the outer boroughs. For example, in mid-June, Jacmel Jewelry leased 23,500 square feet at 1385 Broadway, at 38th Street, taking the entire eighth floor, and moving its executive offices and showroom from Long Island City. The asking rent was $40 per foot, Michael Beyda, of Benchmark Properties, said.
Beyda, along with Matthew Dweck of the Manhattan-based Dweck Group, represented Jacmel. Cushman & Wakefield’s Jonathan Serko, Gary Greenspan, Diana Gaines and Larry Lazerwitz represented building owner Bloomingdale Properties.
Cushman’s research department has become increasingly optimistic about the market since the end of 2010. In January, it revised its projections for 2015’s net effective rents in Class A buildings, raising them from earlier estimates by 11.6 percent to $92.65. Then last month, Cushman bumped that number up again, to $97.81 per square foot. That’s more than $13 per square foot higher than 2007, the record year for net effective rents in Midtown.
Cassidy Turley showed the availability rate for Midtown properties falling by 0.1 points in July from June, indicating a continued tightening of the market, while asking rents, which have been rising in recent months, fell. The average price dropped by $0.65 to $55.45 per square foot in July. The firm noted, however, that the decline was likely not a directional change in the market, but rather the result of relatively more expensive space being leased.
Midtown South is the tightest office market in the country, according to Cushman statistics. And it’s getting tighter.
“We have felt really strong demand recently,” said Marc Packman, a senior vice president and director of leasing at Trinity Real Estate, which owns about 7 million square feet of office space concentrated in the Hudson Square area of Midtown South.
In response, his firm has raised its asking rents 10 to 15 percent over the past two months, he said.
Last month, Trinity signed the contracting firm Michilli Construction + Consulting to take about 11,000 square feet on the 11th floor of 10 Hudson Square. Asking rents for a similar space would be about $48 per square foot, according to Trinity.
“Tenants are requesting information on Hudson Square,” Packman said. “In the past, it’s been a place to stay on the island of Manhattan with a reasonable rent. Now, tenants want to be here.”
The availability rate in Midtown South dropped more than any other Manhattan market last month, falling 0.3 points to 10.1 percent, Cassidy Turley figures showed. Average asking rents rose by $0.39 to $40.87 per foot.
While not able to keep up the same level of momentum as June, July was still a pretty good month for Downtown.
The most significant deal in Lower Manhattan last month was financial services firm Oppenheimer & Company leasing 270,000 square feet in MetLife’s 1.1 million-square-foot tower at 85 Broad Street, formerly Goldman Sachs’ headquarters. Peter Riguardi, Frank Doyle, Cynthia Wasserberger and Alexis Tener of Jones Lang LaSalle represented the landlord, while Matthew Astrachan and Mitchell Konsker of JLL and Cushman’s Jon Herman and Steven Bauer represented Oppenheimer. (Negotiations began before Astrachan and Konsker decamped for JLL in January.)
But at the same time, there were major availabilities brought to the market. As a result of Oppenheimer’s move, for example, the firm’s former 129,000-square-foot space at 125 Broad Street will now be available in December 2012. And, Citibank is offering 138,000 square feet on a sublease at 111 Wall Street.
Overall, most brokers are bullish on Downtown, despite the layoff announcements. Joseph Harbert, the COO of Cushman’s New York region, said at the firm’s second-quarter media briefing last month that Downtown leasing activity has doubled in the first half of the year.
“Something big is going on there,” he said.
Cushman’s figures predicted that by 2014, the net effective rent for Class A office buildings Downtown would be $42.50 per square foot. That’s about even with the peak years in 2007 and 2008, but up 60 percent from 2010, the lowest point in this cycle, when it fell to $26.50 per square foot.
The availability rate for Downtown declined by 0.1 points to 11.9 percent in July, according to Cassidy Turley. The asking rent rose by $0.28 to $37.74 per square foot, the company reported.