Sixth Avenue space piles up

A premier Midtown stretch sees more availability as leasing from large office tenants remains scarce
By Adam Pincus | November 01, 2012 07:00AM

In a stark reminder that large tenants have retreated, the amount of available office space is piling up on a stretch of Sixth Avenue that is home to many of the city’s premier office addresses.

Last month, Manhattan landlords and tenants listed another 384,000 square feet in six buildings located between 41st and 55th streets on Sixth Avenue, a survey of commercial data website CoStar Group showed.

Meanwhile, in a report last month, commercial firm CBRE Group outlined how, for the first nine months of the year in Midtown, activity for smaller deals was steady, but volume for larger deals — above 100,000 square feet — was down.

“The real drop-off has been in the large tenant market,” said Peter Turchin, an executive vice president at CBRE, speaking at the firm’s third-quarter market briefing. “We have not seen large tenants moving that much.”

Boston Properties CEO Mort Zuckerman echoed the sentiment that large tenants were not on the hunt. He partly attributed that to the fact that many are renewing leases or looking to shrink their footprints.

“There is, undoubtedly, a review on the part of almost every major firm, particularly financial firms who are taking advantage of technology, amongst other things, to see how much space they really need,” Zuckerman said in his firm’s third-quarter call with analysts late last month. “And most of them are heading in the direction of contracting their space.”

Overall, the Manhattan leasing market remained flat last month as many firms held off making decisions in a period of economic uncertainty.

Average asking rents rose by $0.30 per foot to $56.82 per square foot in October, compared with the prior month. The availability rate — which counts space that is vacant now or will be available within six months — remained unchanged at 10.3 percent, data from commercial firm Cassidy Turley showed.


In the Midtown market, the biggest trend of the month was the dumping of office space on Sixth Avenue.

While tenants have inked some blockbuster deals this year in Midtown, those leases — such as Viacom’s deal at 1515 Broadway for 1.6 million square feet in April — have been renewals or small expansions that absorb little or no new space.

TRD’s analysis found that the stretch of Sixth Avenue between 41st and 55th streets had an availability rate of 20 percent among the 20 buildings that had the most available space.

For example, last month Rockefeller Group Development, which owns the 2.5 million-square-foot 1221 Sixth Avenue, listed 195,316 square feet of space, bringing its total available space in the building up to 786,927 square feet.

A spokesperson for the Midtown-based company noted that the space being marketed in the building, while available, was not actually vacant, and the firm had about a year to fill it with tenants.

“From our perspective, we are optimistic that there will be a pickup along the avenue. There has been an artificial lag in leasing, and we do expect a post-election [bump]” sometime next year, the Rockefeller spokesperson said, attributing the lag to the uncertainty surrounding the presidential race.

Other buildings with more than 400,000 square feet available (either directly through the landlord or through a tenant) are Vornado Realty Trust’s 1290 Sixth Avenue, Paramount Group’s 1301 Sixth Avenue and Japanese real estate investment firm Mitsui Fudosan’s 1251 Sixth Avenue, TRD’s analysis of CoStar data showed.

Yet there have been some large deals on the avenue this year.

For example, Amazon leased about 92,000 square feet at 1350 Sixth Avenue, and, in September, law firm Chadbourne & Parke inked a deal for 200,000 square feet at 1301 Sixth Avenue.

In a near parallel of the broader Manhattan market, Midtown saw very little change in market measures in October, Cassidy Turley figures show. The average asking rent rose by a scant $.04 per foot to $64.50 per foot, while the availability rate remained steady at 11.1 percent, the firm reported.

Midtown South

The submarket most popular with tech firms will likely get several hundred thousand more square feet of office space, after getting a nod from a city council subcommittee.

Indeed, Jamestown, which owns Chelsea Market at 75 Ninth Avenue, won approval from the council’s zoning and franchises subcommittee to construct a 300,000-square-foot addition on top of the landmarked building, once home to Nabisco.

Like much of Midtown South, the Chelsea submarket is in demand with inventory tight and the online behemoth Google looking for more office space. (That’s even after Google purchased the 2.9 million-square-foot 111 Eighth Avenue across the street from Chelsea Market.) The firm is trying to grow by taking more space in its Eighth Avenue building, but longterm tenants there are hemming it in, insiders said.

Last month, Google, represented by CBRE, took 94,000 square feet at Chelsea Market, giving it a total of 202,000 square feet in that building. Jamestown was represented by Newmark Grubb Knight Frank.

The average asking rent in Midtown South did slightly better than it did in Manhattan on the whole. In October, it rose by $0.99 per foot to $48.73 per foot, while the availability rate declined slightly by 0.1 point to 7.9 percent.


Even as large leases have been rare in Midtown, Downtown has shown some activity. The City of New York signed a new lease last month for 131,946 square feet at SL Green’s 100 Church Street. In that deal, a CBRE team represented the city, and brokers from Newmark and SL Green represented the owner.

In September, media company Nielsen leased more than 116,000 square feet of executive and administrative space at 85 Broad Street, a building Jones Lang LaSalle represents.

Despite that activity, Downtown, where millions of square feet are expected to be added to the market in the coming months, saw a modest increase in availability rate, up 0.1 points to 10.4 percent. At the same time, the average asking rent ticked up slightly, by $0.46 per foot, to $39.84 per square foot, Cassidy Turley showed.