By Adam Pincus on September 01, 2014.
One aspect of the Manhattan’s office leasing market was stuck in the summer doldrums last month, as landlords put far fewer square feet on the market compared with the yearly average.
The brokerage firm DTZ analyzed all new space that hit the market over the past year, and found about 2 million square feet was listed in August, down from the average of about 2.5 million per month.
And in larger space, the situation was more dramatic.
A review by The Real Deal found only about 200,000 square feet of large, new space in eight buildings listed on CoStar as of late last month, in contrast to about 400,000 square feet in February.
Insiders said often landlords don’t list space in August, bowing to the prevailing mindset that tenants and brokers are cooling their heels at the beach or by the pool.
But the leasing activity last month indicates that was not the case this year.
“I think the general feeling is people are away and not paying attention as much,” William Elder, managing director at the landlord RXR Realty, said. “I am not sure that is ever true, because it’s been very active.”
“We don’t hold back listings,” he said, but added, “We will not launch a major marketing campaign” either.
A preliminary review showed that August was about on par for monthly leasing activity, said Cushman & Wakefield’s Senior Managing Director of economic analysis and forecasting, Kenneth McCarthy.
“August is sort of a mix. There is a sense that things close down in the summer, but I don’t find that to be true,” McCarthy said. “Deals sort of have their own life.” Yet some said it made sense to hold back on new listings.
“With business activity generally slower during the summer months, it makes sense to limit the posting of new listings at that time,” said Giorgio Versea, DTZ vice president. Insiders expect large blocks to hit the market in the coming months and years as tenants relocate to newly-constructed buildings.
“It is possible that people are waiting,” until after Labor Day, McCarthy said, “but it is also possible that the market is a little healthier and is seeing space absorbed.”
The average asking rent for Manhattan rose to $65.24 per square foot in August, from $64.61 per foot the prior month, figures from commercial firm Colliers International showed. At the same time, the availability rate, which measures space vacant or that will be available in approximately 12 months, fell by 0.4 points to 10.4 percent, the Colliers data revealed.
Underscoring the lack of new listings, the largest new space to hit the market in Midtown last month was just 63,210 square feet, at 630 Fifth Avenue, CoStar’s database showed. That was one of only three spaces greater than 30,000 square feet listed in Midtown, for a total of 133,000 square feet, TRD’s analysis showed.
There were summertime deals, however. Private debt and equity placement firm the Audax Group signed a new lease in mid-July for the entire 19th floor of 320 Park Avenue, between 50th and 51st streets, information from the leasing data firm CompStak showed. Audax took about 19,274 square feet in the 750,000-square-foot building, according to CoStar. David Goldstein, Greg Taubin and Jason Perla of brokerage Savills Studley represented the tenant, while Frank Doyle and David Kleiner of JLL represented the landlord, Mutual of America Life Insurance.
The 10-year lease starts at about $90 per square foot, according to CompStak.
That is far above the average asking rent for Midtown, which was $75.20 per square foot last month, compared with $74.59 per foot the prior month, Colliers figures showed. Meanwhile, the availability rate fell to 10.7 percent from 11.2 percent in July.
Audax is currently located in the 390,000-square-foot 280 Park Avenue, between 48th and 49th streets.
Another recent lease, as TRD reported, was inked by Gindi Capital, the real estate portfolio manager for the Gindi family, which owns discount clothing retailer Century 21.
Gindi Capital inked a long-term,19,055-square-foot lease last month for the entire 11th floor at 19 West 34th Street, a 260,000-square-foot building located between Fifth and Sixth avenues.
The building, now fully occupied, is owned by the Domansky-family’s PRD Realty. Gindi Capital did not respond to a request for comment.
The largest space to hit CoStar in Midtown South last month was at 395 Hudson Street, a 10-story building owned by the New York City District Council of Carpenters.
A Cushman & Wakefield team of Barry Zeller, Jonathan Serko, Richard Serko and Andrew Ross brought the entire 64,233-square-foot eighth floor to market. The building has a total of 600,000 square feet.
They are offering to divide the space, as well as combine it with a smaller space on the seventh floor, that could create a 75,000-square-foot office.
There are very few large options in the neighborhood, a point underscored by Zeller.
“We can provide one of the only 65,000-square-foot floorplates that is available in the Midtown South market,” he said. He added they are looking for tenants in the technology, advertising, media and information sector.
The asking rent in the building has climbed from the low $60s a year ago to $72 now, Zeller said.
“It is demand, and the occupancy of the building,” he said of the increase in asking rent. But he did not expect the jump to spook potential tenants. Instead, the large floorplates would allow for increased efficiency. That is an argument often heard from leasing agents at the city’s new pricy office towers.
That price is significantly above the overall asking rent in Midtown South, which was $56.60 per square foot in August, up by 4 cents from July, Colliers figures showed. At the same time, the availability rate tightened by 0.4 points to 8.5 percent in August.
In Lower Manhattan, RXR Realty last month listed two high floors at 61 Broadway, a 780,000-square-foot building it purchased in May for $330 million.
The 30th and 31st floors each have 24,479 square feet in the 33-story tower, located south of Rector Street, according to CoStar.
The 1916 building offers a sharp, nearly century-old contrast to the spanking new towers a few blocks north at the World Trade Center.
“The headline is everyone is coming to Downtown. They find this a good value, well located, and it’s great real estate,” said RXR’s Elder. “Not a shiny new tower with no character. It’s got lots of character.”
The asking rent is in the low $50s, about $20 below the asking rent at the World Trade Center, but closer to the asking rents for Brookfield Place.
The average asking rent for Downtown was $50.02 per square foot, up by $1.11 per foot from July, while the availability rate fell by 0.3 points to 12.5 percent, the Colliers statistics revealed.