$43.69 Per Square Foot
Just blocks from buttoned up Midtown lies the somewhat bland-sounding market of Midtown South. Contrary to its name, it is arguably the most happening of commercial markets in the entire United States at the moment.
This live-work-play swath contains the neighborhoods of Chelsea, Flatiron, SoHo/NoHo/Village, Hudson Square and TriBeCa with a wide variety of office product. An entire column could be devoted to each of these areas, but for sake of brevity I will lump them together (let’s not even get into the retail, gallery and residential worlds).
The one unifier on the office side is that most buildings are older (average age is 97 years versus
Midtown’s 76 years), no matter their size, with little new product. Many of the buildings have
been upgraded rather substantially with open floor plans and wired to the hilt. And though
tech/media tenants get most of the publicity, the area also contains a fair number of fashion,
financial, non-profit and education tenants among the myriad of others looking for that 24/7 mix.
At 9.0 percent, Midtown South has the second lowest overall vacancy rate in the nation (of the
major markets), after Honolulu at 6.7 percent [Editor’s note: Because the methodology differs, Cushman & Wakefield, among others, figures Midtown South’s vacancy rate at 5.9 percent] The figure is also well below the 20-year quarterly average of 11.4 percent. The current overall average asking rent of $43.69 per square foot is 43.6 percent above the 20-year quarterly average of $30.43 per square foot; it is approaching the quarterly record high of $49.35 per square foot which occurred in June 2008. Compared
with other major U.S. markets, it ranks as the third highest average asking rent after Midtown and Washington, D.C.
There is minimal new office construction underway or proposed – 51 Astor Place (430,000 square feet), 510 West 22nd Street (175,000 square feet), 860 Washington Street (100,000 square feet), 837 Washington Street (81,000 square feet) and 75 Ninth Avenue (undetermined size) – all of which will certainly push asking and effective rents much higher.