And the Award for Lowest Availability in Midtown Goes To …
Okay, by Newmark Grubb Knight Frank’s submarket definition, it’s technically called Westside/Times Square, but close enough. And how appropriate, with the Tony Awards just around the corner, that the center of theater is also the hottest submarket in Midtown at the moment.
At NGKF, the Westside/Times Square (W/TS) submarket is defined as West 41st Street to West 62nd Street, from Seventh Avenue to the Hudson River. At the end of May, there were just over 2.5 million square feet being marketed, for a Class A availability figure of 8.1 percent (the next lowest today in Midtown is the East Side at 11.1 percent).
W/TS availability has eased since a post-recession high of 12.6 percent back in February 2011, although it remains well above its recent record low of 4.5 percent in August and September of 2007. Now there is a tendency to think of a low availability rate as a good thing, but of course “it ain’t necessarily so,” to borrow a song from Gershwin’s Porgy & Bess. Certainly a landlord would be pleased with a tight market, and it would follow that the economy must be performing well, with companies in hiring mode.
However, a tenant in the market may have a slightly different viewpoint: a hot market usually means higher rents, which can dissuade a firm from staying, moving or expanding within a certain area. In some cases, the cost could push it out of a city like New York altogether. Rents in W/TS have indeed been climbing, with the average asking rate for Class A availability now at $64.71 per square foot, up 21.7 percent from its post-recession low of $53.17 per square foot, although still 28 percent below its record high of $89.89 per square foot in May 2007.
Asking rents may rise even further as additional top-tier availability comes online. Within the next few months, two blocks of space will likely enter NGKF’s numbers—478,000 square feet (currently in the construction phase) at 250 West 55th Street and approximately 700,000 square feet at 4 Times Square (from soon-to-relocate Condé Nast, in the office building that many consider the first to have kick-started the Times Square renaissance).
This could take the W/TS Class A availability rate from its current 8.1 percent to 11.5 percent. But “don’t rain on my parade,” as Ms. Barbra Streisand sang in Funny Girl. With uses from office to hospitality to retail to, of course, culture, “everybody say yeah” as they belt out in Kinky Boots (finally a modern reference, from a new Lauper/Fierstein/Mitchell musical) and check out Westside/Times Square—the hottest ticket … er, submarket—in Midtown.