Banks, tech among departures sinking Midtown office market

Midtown South moved ahead in asking rents for first time

(iStock)
(iStock)

Midtown Manhattan’s struggles in the wake of the pandemic have reached a new low, with banks and big tech companies partly to blame.

These companies are eschewing Midtown offices in favor of spots in trendier neighborhoods, the Wall Street Journal reported. The widespread flight to quality over the last year has seen companies drawn to features like outdoor space and smaller carbon footprints in hopes of luring workers back to the office.

The shift from Midtown — identified as the area between Bryant and Central parks — is having a sizable effect, particularly on asking rents. Asking rents in Midtown South — the area south of Bryant Park stretching west to Hudson Yards and down to Canal Street — surpassed those in the longtime business corridor for the first time this spring, according to Colliers data reported by the Journal.

At the end of last month, Midtown South boasted a 2.5 percent premium in asking rents over its uptown counterpart.

Big tech’s move away from Midtown has been plastered across search results and news feeds. Last year, Google shattered a pandemic record by purchasing 550 Washington Street in Hudson Square for $2.1 billion. The building is under construction and isn’t expected to open until the middle of next year, at the earliest.

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Meta Platforms has also shown an increased interest in offices away from Midtown, occupying four buildings south of Midtown. Big tech’s importance in the office market only increased during the pandemic, as CBRE data showed tech companies leased 76 percent more space year-over-year in the last three quarters of 2021.

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Banks and financial institutions are also hoping to be hip by moving from Midtown. Earlier this month, HSBC signed a lease for 265,000 square feet at the Spiral, Tishman Speyer’s high-profile development in Hudson Yards. In a sign of the times, the 20-year lease means HSBC is leaving Fifth Avenue, its Midtown headquarters.

There are detractors who are still betting on Midtown, whether because of belief or because it would simply be too costly to bail at this point. The most prominent among them is JPMorgan Chase, which is moving ahead with a 60-story, 1,388-foot-tall tower at 270 Park Avenue. The 2.5 million-square-foot building is expected to house up to 14,000 employees and be completed by the end of 2025.

[WSJ] — Holden Walter-Warner