Low availability defines Midtown.
With a banner year for Wall Street, record low unemployment and a seemingly tireless economy, it should be no surprise that Midtown continues to post low single-digit availability rates, and that Midtown South and the far West Side have begun to benefit from the overflow demand. The upcoming year will likely see these areas further enter the mainstream with possible new construction and an increased number of buildings undergoing repositioning.Availability rates for commercial office space in Midtown decreased across the board in the fourth quarter of 1999. Overall, availability for New York decreased 19 percent, from 5.2 percent to 4.2 percent, with Class A availability down 24 percent to 2.9 percent and Class B decreasing to 4.5 percent from 5.2 percent. Lack of available inventory caused leasing activity to drop by 39 percent over the third quarter.
A total of 5.6 million square feet was leased in Midtown in all categories of space during the fourth quarter, compared to 9.1 million in the previous quarter. Leasing for Class A space decreased by 53 percent to 1.3 million square feet while leasing for Class B inventory fell 46 percent to 2.5 million square feet. Notable fourth quarter deals included Wasserstein Perella & Co, Inc.'s lease for 181,000 square feet at 1301 Avenue of the Americas and Coty U.S. Inc.'s lease for 100,000 square feet at One Park Ave.
The Class A rental rate increased a mere $0.02 to $56.23. Meanwhile, the Class B rate increased $0.57 to $44.15 per square-foot, and the rental rate for other classes of space increased $2.68 from the third quarter to $28.28.
The Westside I submarket showed the greatest change in leasing activity. Overall, leasing decreased 2.3 million square feet to 882,648 square feet, or a change of 72 percent from the third quarter when Ernst & Young signed on for 1.6 million square feet of space at 5 Times Square. Leasing activity for Class A space dropped 60 percent to 552,940 square feet in the fourth quarter and Class B space declined a full 87 percent to 226,743 square feet.
The Grand Central I submarket experienced another significant decrease in activity. Overall space leased in this submarket fell by 52 percent, from 2.1 million square feet to 1 million square feet. Class A space leased in the Grand Central I submarket slipped 62 percent to 319,907 square feet while Class B space dropped 48 percent to 562, 551 square feet.
New media and technology companies continued to make their presence felt in the Thircan submarket. Class B properties commanded $34.72 per square-foot in the fourth quarter, an increase of $2.21 from the previous quarter. Major transactions included Starmedia Network's lease for 210,072 square feet at 75 Varick St. and barnesandnoble.com's 170,000 square feet renewal and expansion at 111 Eighth Ave.
New York City's economic growth appears likely to continue forward at a steady pace, driving activity in all sectors of the commercial office market. The growth of the technology industry and related professional service firms will continue to increase space use in nontraditional neighborhoods. Many of these companies are far from producing revenue and could experience a backlash several years out when investors and venture capitalists demand results. At present, however, ample funding exists and the true impact of Internet economy has yet to be seen.
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| Author: | Lemle, L. Craig |
|---|---|
| Publication: | Real Estate Weekly |
| Geographic Code: | 1U2NY |
| Date: | Jan 26, 2000 |
| Words: | 582 |
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