Midtown South Class B office rents eclipse fancier Midtown’s

Market brightens at summer’s end with vacancy at 2008 levels, report says

From left: Richard Persichetti of Cassidy Turley and Midtown Manhattan
From left: Richard Persichetti of Cassidy Turley and Midtown Manhattan

The Manhattan office leasing market saw a surprisingly hot close to the summer. Vacancy in the borough now sits at 11.2 percent – the lowest since 2008, according to a monthly office market report from commercial brokerage Cassidy Turley, released today.

Increased activity in Midtown, where smaller financial firms have begun leasing up space, as The Real Deal has reported, buoyed the market, with vacancy also dropping to 11.2 percent in that market in August, down from 12.4 percent year-over-year. Average asking rents in the market were $70.68.

Downtown, firms fleeing high prices in tech-heavy hype-machine Midtown South and tonier but stodgier Midtown also nabbed a considerable amount of space, said Richard Persichetti, head of research at Cassidy Turley. By his estimate, 90 firms had relocated Downtown from the other Manhattan markets since the beginning of the year.

But while leasing volume Downtown increased, vacancy grew, with large spaces coming online in the market. While much of that space was absorbed, Persichetti said, it still brought vacancy to 13.6 percent, up from 10.4 percent in August 2012.

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Meanwhile, the growth in trendy Midtown South continues unabated, with average asking rents rising 17 percent, to $67.13 per square foot from $57.26 year-over-year, and vacancy at 8.7 percent, more or less steady from last year’s 8.9 percent rate.

Most notably, Class B rents in the Midtown South submarket eclipsed those in tonier Midtown, as Persichetti observed, underscoring the cachet of the southerly market, where technology firms like Google make their home. Average asking rents for Class B space in Midtown South were $48.97 per square foot in August; comparable space in Midtown was going for an average of $47 per square foot.

Unlike financial tenants, which may crave marble flooring and Central Park views in order to woo investors, start-ups look for exposed beams and space they can customize themselves, Persichetti noted.

“The new media type tenants that are leasing space [in Midtown South]… the classification of buildings means nothing to them,” Persichetti said.