The Heart of Manhattan: Why Midtown is Starting to Make Sense, Again
By Jotham Sederstrom April 17, 2012 8:00 am
reprintsMidtown rents improved too, starting off in the low $50-per-square-foot range at the end of 2010, but creeping up to nearly $60 in the middle of 2011, before settling back to $56, on average. The Grand Central submarket had the most growth, with rents jumping from $53 to $57, or 7.4 percent. Top-tier properties in that submarket finished 2011 at an average of $64 per square foot, an 11 percent increase over the year before. And the trend appears to be continuing into this year. Already the average rent has ticked up to $66.32 for prime office space.
Rents may be staying high in the Grand Central area, but it was Murray Hill, which is considered part of Midtown’s commercial real estate market, that led the district’s recovery. Murray Hill’s vacancy rate dropped by more than 4 percent in 2011, due in part to the Asian import-export giant Li & Fung’s 15-year lease in the Empire State Building.
The 490,000-square-foot deal was nearly a year in the making and was finalized in January 2011 with the help of William Cohen and Ryan Kass of Newmark (NMRK) Knight Frank, who represented the building. Cushman & Wakefield (CWK) repped Li & Fung, getting them in at about $45 per square foot in a deal that was sweetened by environmentally friendly improvements to the aging Empire State Building. The 80-year-old building completed $550 million of renovations that will allow it to reduce its carbon emissions by 105,000 metric tons over the next 15 years and reduce the amount of energy it uses by $4.4 million.
The expansion race among New York City hospitals also helped Midtown lift its occupancy rate. A 21-year lease for 180,500 square feet at 1 Park Avenue by NYU Langone Medical Center for office and clinic space doubled the university’s presence in the building to 367,584 square feet.
“One Park Avenue remained the top choice for NYU Langone Medical Center,” said Cushman & Wakefield chairman of global brokerage Bruce Mosler, who left open the door for the university to take even more space in the coming years.
“The building is strategically located within walking distance of the medical center’s main campus and, with allowances for future expansion rights, will become a core asset for NYU Langone,” said Mr. Mosler.
The diversification of city’s industries after the financial crisis has helped kept Midtown’s office market alive in lean times with tech and media companies absorbing some of the vacancies left by failing financial firms.
