Midtown South leads Manhattan’s office market recovery: report
Is Manhattan’s office market recovering? Depends where you look.
Its comeback in the months ahead will vary widely from one submarket to the next, according to an analysis by KPG Fund and Newmark.
During the third quarter, prospective tenants were looking for 6.5 million square feet of office space in Midtown South, which includes Chelsea, Flatiron, Hudson Square, the Meatpacking District and NoHo/SoHo — up a robust 64 percent from the first quarter of this year, according to the analysis.
On the other hand, demand for office space declined in Downtown East as well as in Midtown neighborhoods including Murray Hill, Park Avenue and the Plaza District. In Murray Hill, for example, prospective tenants collectively looked for 230,000 square feet of office space in the third quarter, down 29 percent from the first quarter.
The report did not offer year-over-year comparisons.
Office demand figures serve as an indicator of future leasing activity, said Greg Kraut, CEO of KPG, which specializes in modernizing mid-market office buildings.
Kraut noted that tech and media companies aiming to attract talent are driving office demand in Midtown South because they believe young professionals want to be where they can live, work and play.
Midtown South has already been the choice of Google, which last month announced its intention to exercise a $2.1 billion purchase option for its 1.3-million-square-foot leased office building at 550 Washington Street in Hudson Square.
In addition to Midtown South, Midtown neighborhoods just north of Chelsea also had more tenants looking for space, according to the analysis. Office demand in the Penn District more than doubled in the third quarter, to 1.7 million square feet, from the first quarter of this year. The area’s major tenants include Facebook, which last year signed a 730,000-square-foot lease at Vornado Realty Trust’s Farley Post Office redevelopment.