Five big deals driving Midtown South leasing: CBRE

Area’s asking rents were at a record high in September

Peter Turchin
Peter Turchin

Just five large tenants — none of them Internet start-up firms — accounted for nearly a fifth of all relocation leases signed so far this year in the city’s tightest market, Midtown South, a new report from commercial firm CBRE Group shows.

The tenants, retailer JCPenney, New York University, advertising firm Havas, research-focused New York Genome Center and Weight Watchers International, each took more than 100,000 square feet for a total of about 17.9 percent of the 3.9 million square feet leased in Midtown South so far this year, the data shows.

Courtesy CBRE. Click to enlarge.

That’s a large increase from 2011, when deals larger than 100,000 square feet accounted for just 11 percent of the total of 3.9 million square feet leased through Oct. 1, 2011. The data was released as part of a third quarter 2012 media briefing this morning at CBRE’s Tri-State headquarters in Midtown.

The report shows that while smaller technology firms have been active in the area, as has been well reported, it has been a limited number of large, non-Internet firms that have absorbed a significant amount of the office space, pushing down the availability rate to 8.4 percent, down from 15.2 percent in 2009.

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That has driven up asking rents in Midtown South which hit a record $53.40 last month, beating the 2008 high point of $52.43 per square foot. And the current level is more than 8 percent above the rate in 2000, when the availability rate was just 4.9 percent.

“There is demand for those [large] spaces and not a lot of supply, so that is kind of what is driving the price,” Peter Turchin, executive vice president at CBRE, said at the briefing.

Meanwhile in Midtown, large deal activity has nearly ground to a halt, even as smaller deal volume remains about the same as last year. For example, in the first nine months of 2011 and 2012, leases smaller than 10,000 square feet accounted for about 3.1 million square feet of leased space. Last year there were 15 deals larger than 100,000 square feet, totaling 3 million square feet; this year there have only been two such deals, totaling 284,000 square feet, the CBRE data shows.

The Midtown availability rate rose to 12 percent in September from 11.9 percent the prior month, while the asking rent rose as well, to $65.11 per foot from $64.73 per square foot.

And Downtown has seen a similar result this year, with deals over 100,000 square feet accounting for 772,000 square feet, while last year leases above 100,000 square feet accounted for 2.1 million square feet of leased space.

The availability rate Downtown rose to 10.6 percent in September from 10.4 percent the prior month, while the average asking rent rose to $40.13 per foot, from $39.87 per foot during the same period, the report says.