It’s been a difficult month for financial firms, with investment bank Gleacher & Co. winding down and hedge fund giant SAC Capital Advisors accused of insider trading. Luckily for the Manhattan office market, demand from tech and media companies is on the rise.
At the start of last month, companies in the so-called “TAMI” sector — technology, advertising, media and information — were on the hunt for some 5.8 million square feet of Manhattan office space, according to an estimate from the commercial brokerage Cushman & Wakefield. That’s up 21 percent from 4.8 million in early July 2012.
TAMI companies in search of space include the Doha-based broadcaster Al Jazeera, which needs up to 200,000 square feet. The entertainment companies Sony and HBO are looking for some 500,000 square feet each. And the small but fast-growing online marketing company Constant Contact signed a lease in June for 21,441 square feet at 17 Battery Place South in the Financial District.
The uptick in tenants looking for space should translate into a greater volume of deals later this year, and could lead to higher prices, brokers said.
“Notwithstanding that we are in the summer doldrums, there seems to be a steady stream of activity: tenants entering the market and deals getting done,” said Louis Buffalino, senior vice president in the Midtown office of the commercial services firm DTZ.
The average annual Manhattan asking rent rose to $56.85 per foot in July from $56.61 in the previous month, according to preliminary figures from the commercial firm Colliers International. The availability rate, which measures space that is vacant or will become available over the next year, held steady last month at 12.1 percent, the same level as in June, the firm reported.
A major addition of space to the Midtown office market last month came from the faltering Gleacher, which recently informed its shareholders that it will cease operations. Last month, Gleacher placed its 83,452-square-foot headquarters at 1290 Sixth Avenue on the sublease market. Jones Lang LaSalle brokers Matthew Astrachan, Mitti Liebersohn and Scott Vinett have the listing for the space, located on the fourth and fifth floors. The sublease runs through 2025, according to property database CoStar Group, which did not list an asking rent. JLL and Gleacher did not respond to a request for comment.
Gleacher is currently paying rent at or above $58.70 per foot, according to documents filed with the U.S. Securities and Exchange Commission. And the financial firm is preparing to take a hit of $15 million to $20 million at its leased properties, according to SEC filings, which suggests the company expects to sublease the space for less than it is paying.
Brokers are also speculating about what might happen to SAC’s 66,000 square feet of Class A space at 510 Madison Avenue, a 350,000-square-foot tower at 53rd Street owned by the real estate investment trust Boston Properties. SAC, headed by Steven Cohen (see related story here), inked the high-profile lease in 2011. SAC’s main headquarters is at 72 Cummings Point Road in Stamford, Conn., in a 98,905-square-foot office building it owns.
If SAC were to go out of business, the Midtown space would likely be reabsorbed easily: Class A space in that area was hit hard in the downturn but has rebounded, according to Ryan Severino, senior economist at the analytics firm Reis.
“I can’t say it would be immediately leased up, but I don’t think [the ownership] would be too worried about releasing it,” Severino said.
In Midtown last month, the average asking rent rose to $66.88 per square foot from $66.09 in June, according to Colliers, while the availability rate fell slightly to 12.2 percent in July from 12.3 the previous month.
Less than a year after fashion designer Tory Burch signed a 10-year-deal for 77,995 square feet on two floors at 350 Hudson Street, landlord Trinity Real Estate has put both floors back on the market at a slightly higher asking rent.
Each floor is now asking $58 per square foot, up from $54 per foot when the deal was signed in May 2012, according to CoStar.
That’s just above the average asking rent for Midtown South, which was $52.02 per foot last month, up from $51.52 per square foot in June, Colliers data showed.
The availability of the Tory Burch space is likely welcome news for tenants looking for space in Midtown South, the city’s hippest office sector. Commercial brokers complain that large blocks of space are rare in the area, Buffalino said. According to Colliers, the availability rate in Midtown South last month was 9.2 percent, the same as in June.
Tory Burch’s brokers, Donald Preate and Jamie Katcher of Cushman & Wakefield, declined to comment, as did Trinity.
Massachusetts-based Constant Contact recently paid about $65 million to acquire the start-up SinglePlatform, which helps small businesses with online listings. At the time, SinglePlatform occupied about 7,000 square feet at 17 Battery Place, which is co-owned by the Moinian Group and Newmark Holdings. Then, in June, Constant Contact signed a five-and-a-half-year lease for a larger space in the same building. The company now has nearly 25,000 square feet on two floors at 17 Battery Place.
The space was listed with an asking rent of $35 per square foot, according to Adam Leshowitz, a managing director at Newmark Grubb Knight Frank, who represented the landlord with colleagues Jordan Gosin and Travis Wilson. Constant Contact was represented by Cassidy Turley’s Mark Furst, Andrew Bay and Stephen Bellwood, and brokers from the Boston-based firm Richards Barry Joyce & Partners.
That’s slightly below Lower Manhattan’s average asking rent last month of $46.89 per foot, which is up from $46.20 in June, Colliers said. The availability rate was 15.9 percent last month, unchanged from June, the firm reported.
Constant Contact isn’t the only tech firm taking up residence downtown. Midtown South is so hot that a number of TAMI firms have been priced out of the area, Leshowitz said.
“We are seeing continued interest,” he said, “from tenants from Midtown South.”