Education Sector’s Manhattan Office Space Surges With Monster Deals and Expansions
Though it still makes up just two percent of the Manhattan office market’s total inventory, a number of significant deals have caused a surge in the education sector’s Manhattan footprint.
A report from CBRE attributes the 47 percent jump in office space leased by the sector – between 2005 and November 2012 – to a growing residential population, increases in enrollment at universities, campus expansions, greater availability and lower asking rents in sections of Midtown South and Downtown.
“The type of property that educational tenants gravitate to is not necessarily the classic glass and steel Class A property that our traditional office tenants gravitate to,” said Pamela Murphy, a senior vice president of research with the firm, in a statement accompanying the report. “Educational tenants are occupying property that might otherwise be considered obsolete for modern office business activity.”
Among the largest educational office leases between 2009 and 2012 were Avenues: The World School’s 240,000-square-foot lease at 259 Tenth Avenue; Leman Manhattan Preparatory School’s 204,000 square feet at 25 Broadway; the City University of New York’s 198,000 square feet at 555 West 57th Street, as well as its 137,000-square-foot new lease at 395 Hudson Street; and Technical Career Institute’s 138,000-square-foot renewal at 320 West 31st Street.
The conversion of office buildings to educational use and the planned development and expansion of educational institutions are expected to continue to increase the education sector’s footprint.
Among pending development projects is New York University’s proposed six-million-square-foot expansion into Manhattan, Brooklyn, and Governor’s Island, set to take place over the course of two decades; Columbia University’s $6.3 billion Manhattanville project, set for completion in 2015; Pace University’s new 220,000-square-foot dorm at 180 Broadway, also set for 2015; and a number of other projects in the works at The New School, Fordham University, Hudson Yards and the City University of New York.
Lower rents in Midtown South and Downtown are especially attractive to educational institutions, especially those in pre-war space, which offers the greater discount.
“Recent education sector leasing activity in office buildings has focused on the Midtown South and Downtown markets,” said Bruce Surry, an executive vice president at CBRE, in the statement.
The data shows pre-war rents, at $52 per square foot in Midtown South and $35 per square foot Downtown, are $14 and $17 per square foot cheaper, respectively, than their post-war counterparts.
The industries with the greatest Manhattan footprint are FIRE (finance, insurance and real estate), Professional Services and Media, with 32 percent, 22 percent and 13 percent, respectively, of total inventory.
Educational Services have added 6,100 jobs – a 3.6 percent increase – year-to-date since December 2011, a separate report from Eastern Consolidated shows.