After two years of consecutive increases, rents in Midtown South dropped during the first quarter of 2013, according to CompStak’s effective rent report for the Manhattan office market, provided exclusively to The Commercial Observer.
Effective rent, which includes landlord concessions, in Midtown South fell during the first quarter to $44.62 from $46.44 in the fourth quarter of 2012, a decrease of nearly 4 percent. Starting rent fell from $49.47 to $47.14 during the same period.
From the outside, 222 Broadway fits the stereotype of the Downtown financial office tower.
But when Bank of America downsized, leaving roughly 250,000 square feet of space vacant, a series of tours guided by its new owner, L&L Holdings, quickly blasted that stereotype away.
Condé Nast committed to 80,000 square feet at the tower in early March. WeWork, which provides collaborative workspace for tech and media companies, was next in line.
Everybody Go Downtown
After the storm, things are looking brighter for the lower Manhattan real estate market.
Even with construction scaffolds clogging the district’s narrow streets in a reminder of Hurricane Sandy’s devastation, Downtown office leasing activity jumped 73 percent in the first two months of the year, according to Cushman & Wakefield.
The collaborative workspace provider WeWork signed a 16-year, 120,537-square-foot lease at 222 Broadway, The Commercial Observer has learned.
David Berkey and Andrew Wiener represented the building owner L&L Holding Company in-house. Mark Lapidus of WeWork and Sean Black of Jones Lang LaSalle represented the tenant. Asking rents at 222 Broadway are in the mid-$50 per square foot range.
WeWork typically provides communal office space to tech and new media companies, making the lease another sign of Lower Manhattan’s growing appeal to that type of firm. Mr. Berkey was quick to point out that tech and media tenants are “nothing new” in the neighborhood.
“I’ve been telling whoever will listen that for two years now we’ve seen nothing but this kind of tenant here and at [L&L's] 195 Broadway,” Mr. Berkey said. “We haven’t seen financial services or law firm tenants. It’s not a new phenomenon by any stretch.”
Despite a fair share of new product hitting the Midtown South market in January, landlords continued to call the shots, seeking ever-growing rents in the city’s epicenter for tech and creative companies, the latest data from Cushman & Wakefield shows.
The data shows that total space increased year-over-year in January by 9.8 percent to more than 4.52 million square feet, yet average rents also increased by 10.7 percent to $50.61 per square foot.
The boost in available product was pronounced among Class A and Class B properties, with 41.03 and 47.1 percent increases, respectively.
“It is still a landlord’s market even though that space has come online,” said Ken McCarthy, C&W’s chief economist. “Anyone adding space to the market is asking higher rents.”
News Corp. on the Move?
The recent announcement that News Corp. would split into separate publishing and entertainment entities has left some in the real estate business wondering if the company will flee its longtime home at 1211 Avenue of the Americas.
The prevailing question, according to The Wall Street Journal (a News Corp. entity), is if both companies will end up under the same roof, or go their separate ways. The company, which is represented by CBRE, is not expected to make a decision about the space for years.