Life is full of ups and downs. Just ask the New York Jets rookie quarterback Geno Smith, who through the first seven games of his young NFL career has played a great game followed by a less-than-stellar performance. This made me think of the Midtown Class A average asking rent, which started 2013 at $78.01 per square foot but has been up and down throughout the year. Midtown Class A average asking rents are actually down from January by $0.80 per square foot to $77.21. But why is this?
Geno Smith’s ups and downs are understandably from his being new to the NFL and learning on the job. Midtown cannot use that excuse, as it is the most established market in Manhattan. But in examining the Class A rental slump, at least part of the fluctuation is because the majority of demand is coming from companies that are looking for Class B product or more of a value-driven transaction. In fact, Midtown Class B asking rents are up $7.98 per square foot since January.
There has been an increase in leases signed upwards of $100 per square foot, from 36 in all of 2012 to 55 through the first nine months of 2013, but this has not been enough to propel Class A landlords to increase asking rents globally. With Class A asking rents remaining relatively stable, the $0.80-per-square-foot drop this year is not a function of market performance but an anomaly as average asking rents are weighted and fluctuates as spaces come on and off the market.
By the time this is published, I sense the up and down trend for Geno Smith will have changed and that he will have led the Jets to a win this past weekend in Cincinnati. As for Midtown Class A asking rents, preliminary October statistics show an increase north of $78.00 per square foot, which would be the highest average reached in 2013. O.K., so with Geno Smith, I may be a biased Jets fan, and it may be too soon to predict his consistency, but for the Midtown Class A asking rents, expect a steady increase to end the year—especially with some significant leases expected to close over the next two months.