The Heart of Manhattan: Why Midtown is Starting to Make Sense, Again
Midtown is starting to matter again.
At least that’s the view to take from commercial real estate deals like Japanese financial firm Nomura Holding’s $60-per-square-foot, 20-year lease for a plush 47-story headquarters at 825 Eighth Avenue.
The arrival of a Japanese multinational at the Worldwide Plaza property embodies the roller-coaster ride of the Midtown office market over the past five years. It was bought by Harry Macklowe for $1.7 billion in 2007, only to be sold at a 60 percent discount two years later in a fire sale that saw George Comfort & Sons snatch it up for $600 million in 2009 when the building was half vacant.
The vacancy rate would only get worse over the ensuing two years. That was until Nomura, which had previously been located at 2 World Financial Center, decided last year it wanted to raise its profile on the American stage—and needed a Midtown address to do so.
While the firm’s Downtown landlord, Brookfield (BN) Properties, heavily courted the international financial giant, insiders say that it was the Midtown address that won Nomura’s management over. Cushman & Wakefield (CWK)’s top leasing broker, John Cefaly, led the negotiation to gobble up 900,000 square feet in the Midtown building, taking the Worldwide Plaza’s occupancy rate past 90 percent for the first time since the slump.
While Midtown still has a long way to go to get back to where it was, brokers say the Nomura deal proves premiere firms are beginning to move on from the recession and are finally willing to pay higher rents for the luxury of an address in New York’s most exclusive commercial neighborhood.
“Midtown has always led Manhattan because location, location, location,” says Robert Sammons, director of research at Cassidy Turley, who believes that strong employment growth continues to drive better occupancy rates across the city.
Midtown’s recovery, however, still lags that of Downtown and the neighboring Midtown South. The Midtown vacancy rate ended the first quarter of 2012 at just under 10 percent, down 0.4 percent from the year before, in comparison to 2.1 percent and 1.3 percent drops in Midtown South and Downtown respectively.
That said, available space dropped more than 4.2 percent in the past year as Midtown brokers inked over 19 million square feet of office space.