Report: Top-Flight Boutique Office Market Stabilizing
Dana Rubinstein March 26, 2010, 9:07 a.m.
All is not horrible in that special niche of the office market that caters to the price-insensitive, hedge-fund class. Indeed, that market might actually be stabilizing, if not looking up, according the latest monthly hedge fund activity report by Jones Lang LaSalle’s Cynthia Wasserberger.
Hedge funds tend to like small spaces, of about 3,000 to 10,000 square feet, and fancy spaces, atop prestige-heavy buildings, preferably in the Plaza District, the gilded precinct east of Sixth Avenue and north of 47th Street. In that district, the vacancy rate fell from 15.7 percent around this time last year to 14 percent today, according to the report: “With over 78 million sq. ft. of Class A space in this submarket, this represents 1.3 million sq. ft. of space absorption, the majority of which was for smaller, boutique tenants.”
Five skyscrapers in particular have seen a surfeit of action, accounting for 187,000 square feet of leasing since the third quarter of 2009:
RFR Realty‘s Seagram Building at 375 Park Avenue and Lever House at 390 Park Avenue; Somerset Partner‘s 450 Park Avenue; Shorenstein‘s Park Avenue Tower at 65 East 55th Street; and Otera Capital‘s 1330 Avenue of the Americas.
More good news! The sublease space supply in this niche market is diminishing, which means that — since sublease space is generally less expensive than directly leased space — asking rents might soon start inching up: “The amount of sublease space on the Class A market stabilized at the end of 2009 and dropped during the first quarter of 2010. After reaching a peak of 8.9 million sq. ft. during 2nd quarter 2009, the sublease availability level dropped to 8.0 million sq. ft. in February 2010.”
That said, sublease space is still being added to the market. Among those looking to shed space: Khronos LLC at 140 East 45th Street; Liberty Mutual at 114 West 47th Street; Boston Provident at 600 Madison Avenue; Sun Trust at Coca Cola‘s 711 Fifth Avenue; Merlin Securities at 712 Fifth Avenue; Cerberus Capital Management at 299 Park Avenue; Morgan Joseph at 600 Fifth Avenue; Wyper Capital at 477 Madison Avenue; Banco Itau at 540 Madison Avenue; Quadrum Capital at 500 Fifth Avenue; American Capital at 505 Fifth Avenue; Cohen & Co. Securities at 135 East 57th Street; and ING at 230 Park Avenue.