The wave crests: Office landlords slashing rents in Midtown
Asking rental prices in the submarket dipped to $87 psf in Q4 2015
Facing increased competition from boutique office space in the Meatpacking District and upcoming developments such as Hudson Yards, many Midtown office building landlords are cutting rents to attract and retain tenants.
Asking rents in the top buildings across Midtown dipped to around $87 per square foot in the fourth quarter of 2015, compared with $91 in the third quarter last year, according to a Savills Studley market report. Among Manhattan office submarkets, Midtown took the hardest hit on rent prices.
The Midtown South office market, which includes the Meatpacking District, Union Square and NoMad, held steady with asking rent remaining at $91 in the third and fourth quarters, according to the report.
“The landlords got too piggy, and the tenants are starting to flee,” Robert Bielsky, chairperson of Manhattan Commercial Realty, a commercial brokerage focused on tenants, told the New York Times.
At SL Green Realty and Vornado Realty Trust’s 280 Park Avenue, discounted rates are being offered for floors while a $125 million renovation is being completed at the 43-story, 1.3-million-square-foot office complex at East 48th Street, the Times reported.
In January, The Real Deal reported Marc Holliday, SL Green’s CEO, saw economic “headwinds” that could dampen the office leasing market.
At 38 Cooper Square in NoHo, prices were slashed by 11 percent this winter to $58 per square foot.
“If a landlord can hang on to a space that’s empty and wait, that’s fine,” said listing agent Nora Stats, of Coldwell Banker Commercial Alliance. “But most landlords can’t wait.”
In Midtown, the office vacancy rate was 7.1 percent last month, according to CBRE. Midtown South saw a 5.1 percent vacancy rate, according to the brokerage.
A Newmark Grubb Knight Frank report released in January identified more than 80 blocks of 100,000-plus square feet of available space in Midtown, a 60 percent increase over the number of spaces available at the peak of 2007. [NYT] — Dusica Sue Malesevic