The surging popularity of the Midtown South office market, which boasts one of the tightest vacancy rates in all of the country, has been good to tech and information companies, but bad to the non-profits and arts groups that have long called the area its work home.
Up to a dozen notable firms like the Theatre Development Fund and the Harry Fox Agency have all left the Midtown South market for better rent deals, The Wall Street Journal reports.
The Theatre Development Fund recently moved from Starrett-Lehigh Building at 601 West 26th Street for a new space in Astoria. The Fund, which runs the TKTS booth, housed its impressive costume collection in its old office, where it had been for 35 years.
The 2.3 million square foot building was purchased by RXR Realty for $920 million in 2011, and rents shot up to above $60 a square foot.
The new ownership was not keen on offering a cheap rent to The Theatre Development Fund:
“They weren’t really interested in giving us cheap rent, so we could not afford to stay there because we had 13,000 square feet,” says Michael Naumann, managing director of Theatre Development Fund, who noted the new landlord did try to accommodate them.
An RXR employee admitted as much:
“We knew when we bought the building that it was possible the building wasn’t for everybody…There were tenants in there that were enjoying a much lower rent than what the market bears now.”
Other firms, like ALM Media, which publishes American Lawyer Media, moved to the Financial District from 345 Park Ave. South and 105 Madison several years ago, citing cheaper rents (at least $20 per square foot cheaper).
The vacancy rate for the Midtown South market went down to 5.9 percent from 6.4 percent in the first quarter of 2012, Cushman & Wakefield announced during a media breakfast last week.
Asking rents rose to $43.69 a square foot, its highest in three years, Cassidy Turley said last week in its March report.