The current difference between average Class B Midtown and Midtown South asking rents is $6.45 per square foot. If we polled brokers on which market’s asking rent was higher, nine out of 10 would probably choose Midtown.
And they would be wrong.
Staying with the theme of Class B being king, Midtown South is the hottest market in the universe and a flight to value. Midtown South Class B asking rents soared past those of Midtown Class B over the past four months. At $56.44 per square foot, Midtown South Class B asking rents are 12.9 percent higher than Midtown Class B rents, which are $49.99 per square foot.
This is the first time this has ever happened in New York City. This recovery cycle feels different than past cycles, as demand from the TAMI (tech, advertising, media and information services) sector remains strong.
Just this past week, Mayor Bloomberg announced an initiative to support the growing tech industry in New York. A website and advertising campaign, “We Are Made in NY,” was launched to help support entrepreneurs and add to the more than 900 tech startups throughout the city.
The growth of these industries and their need for trendy and cost-efficient space has led them to Midtown South Class B product, which has caused the average asking rents to climb 44 percent since they bottomed out in 2010. Over that same time period, Midtown Class B asking rents rose only 17 percent.
This is a clear role reversal from the last rising cycle in 2003-2007, when Midtown Class B asking rents jumped 72 percent and were $15 per square foot higher than Midtown South Class B.
Finally, Midtown South Class B has gotten out of its big brother’s shadow.
Richard Persichetti is the vice president of research, marketing and consulting at Cassidy Turley, with 14 years of NYC research experience