In March, Manhattan Class A direct average asking rents dropped $0.19 per square foot. It’s only a mere $0.19, but the bulk of the decline came due to an $0.85-per-square-foot drop in Midtown Class A average asking rents.
The decrease was the largest since 2010 for Midtown Class A space, and represented the second consecutive month of declines. The $0.98-per-square-foot decline over the past two months is indicative of the shift in demand for space throughout Manhattan. At 22,036,093 square feet, available Class A Midtown space surpassed 22 million square feet for the first time since—you guessed it—2010.
As more space hits the market, additional downward pressure is placed on asking rents.
Five out of the nine submarkets in Midtown contributed to this Class A rental decline, with the most notable declines from the more expensive submarkets. Asking rents in the Fifth/Madison, Park Avenue and Sixth Avenue/Rock Center submarkets all decreased in March. Park Avenue may just be a statistical anomaly, as the availability rate is solid at 10.2 percent, but the other two submarkets continue to add space to the market.
In Sixth Avenue/Rock Center, the 413,000 square feet of negative absorption posted this year led to a 90 basis point increase in availability, to 14.5 percent. The addition of space in this submarket has pushed Class A asking rents down $1.29 per square foot over the past month, to $79.29. Fifth/Madison is the most expensive office submarket in the U.S., but in March, Class A asking rents nudged down $0.35 to $100.96 per square foot. Demand for top-of-the-market space has cooled the past 12 months, as is evident in its 14.9 percent availability rate.
But not everything is bad in the market. After all, Manhattan Class B space continues to soar—average asking rents were up $0.46 to $49.16 per square foot in March.
Richard Persichetti is the vice president of research, marketing and consulting at Cassidy Turley, with 14 years of NYC research experience.