Hudson Square hottest nabe in Midtown South
Midtown South, which already has the lowest vacancy rate of any market in the country for office space, is nurturing a hub for New York City’s tenants du jour — the creative class — and the rents look almost pre-recession there.
The Hudson Square submarket — which runs from Canal to 14th streets, and from Sixth Avenue to the Hudson River — saw the largest decline in vacancy rate and the biggest spike in asking rents of any neighborhood in Midtown South year-over-year, according to Cushman & Wakefield’s fourth-quarter numbers, unveiled at a media breakfast yesterday.
The Midtown South Class A market had a vacancy rate of 4.6 percent at the end of 2011, the data shows. But even within that relatively healthy market, the Hudson Square area stood out. While average asking rents in Midtown South overall increased about $1 per square foot between 2010 and 2011, according to Cushman’s numbers covering the entire year, in the Hudson Square/West Village submarket they increased by almost $5 per square foot, to $49.60 per square foot.
The region offers what creative tenants want — huge floor plates, open space, natural light, and heavy floor-loads — said Andrew Peretz, an executive vice president at Cushman who represents 200 Hudson Street exclusively with partner Bob Constable, in an interview after the breakfast.
“Most of the buildings [in Hudson Square] were light industrial and were updated some time between the 1970s and about four years ago,” Constable told The Real Deal. No other submarket, he added, offers the combination of updated building stock, attractive shopping and eating nearby and, now, the prestige of being in one of New York City’s budding basins for tech and creative tenants.
And although the total square footage leased in the Hudson Square/West Village submarket was 555,171 in 2010, according to Cushman, that figure skyrocketed to 1.1 million in 2011, an addition of almost 600,000 square feet. Midtown South overall only leased 4.44 million square feet in 2011, approximately 400,000 square feet more than in 2010, meaning that Hudson Square accounted for nearly all of the growth in the market.
In Hudson Square, rents at the peak of the market were around the low-$50s per square foot, Peretz said, and bottomed out in 2009 in the high-30s per square foot. Now they’ve not only rebounded to nearly pre-recession levels, but concessions are lower than in Lower Manhattan or Midtown, he said. Currently, landlords are offering landlord contributions to build-outs between $40 and $50 per square foot, Peretz said.
Expansions by firms who already have a presence in the area have helped propel the market — Omnicom and Getty Images both expanded in Hudson Square in the last year. All in all, Peretz estimated he and his team have done 400,000 square feet worth of deals in the area in the last 18 months.
Marc Packman, head of leasing for Trinity Real Estate, the area’s biggest landlord, said more business-friendly amenities are also on their way to the neighborhood. A Pret a Manger recently opened, and Packman said both the Hudson Square Market — a high-end take-out market along the lines of Eataly — and Hale & Hearty have signed leases in the area and will open soon.
And, as Constable pointed out, there is not too much inventory opening up in the area in the near-term. Union32BJ will be moving out of Edward Minskoff’s 101 Sixth Avenue, according to published reports, which will leave approximately 425,000 square feet available. If a large office lease currently in the works at 200 Hudson goes through, that building will only have about 150,000 square feet left to fill, Constable said. In the long-term, Trinity has blocks of space it can develop, but there is debate as to whether they will be developing any office buildings.
Packman agreed that there was not too much space available in Hudson Square. He said that he already has a handful of tenants asking about a 175,000-square-foot space that will open up at the end of the year at 350 Hudson. “We’re seeing a lot of growth,” he said, and the sectors Trinity Real Estate serves happen to be the ones expanding right now. “They’re a great tenant base to have.”