Overall Midtown average asking rents continue to increase, and they are currently $69.21 per square foot—a 4.4 percent increase since the end of 2012. But compare that with overall Midtown average net effective rents, and the increase is substantially higher.
Net effective rents—the face rent minus landlord concessions—averaged $63.30 per square foot during the first two months of the second quarter of 2013, and they are up 10.8 percent since the end of 2012. The recent rise in Midtown net effective rents tightened the gap to asking rents, with a difference between the two of only 9.3 percent.
Over the previous six quarters, the gap between Midtown asking and net effective rents was stable at between 13 and 17 percent, but that has changed so far in the second quarter. Improvements in the Midtown market certainly have a hand in the increase in net effective rents. Midtown availability is finally starting to decline steadily, down 60 basis points this year to 11.6 percent. Also, the rebound in the high-end market has directly affected average net effective rents. New leases being signed north of $100 per square foot are on the rise—29 to date this year—and concessions for these leases tend to be less than the average deal.
Although most landlords continue to offer generous concession packages in the way of allowances and free rent, there has been a slight pullback on them. In 2012, for leases with a minimum term of seven years, an average of 5.3 months was given to tenants for direct space. Through the first five months of this year, however, the average has slightly dropped down to 4.9 months. Also, tenant improvement allowances are on the decline: $56.12 per square foot was offered on average in 2012, compared with $54.45 in 2013.