And Now for the Rest of the Story
In last week’s episode, Don was just about to ask Dan and Joe what happened after he left the big summer dance. Ha, threw you off there for a second, didn’t I?!
But seriously, folks, in last week’s column, I was discussing the significant fall in sublease availability for the Midtown Manhattan market and how it’s within range of the quarterly average figure over the past 20-plus years. I also hinted at what one might consider more negative news—how direct availability has remained quite steep and in fact is at its highest quarterly average since the early 1990s.
For the second quarter of 2013, the overall direct availability figure stands at 21.9 million square feet; it has remained above the 20-million-square-foot mark since the fourth quarter of 2011. To put this number in more perspective, the low point over the past 20 years was just one-third of this figure—7.3 million square feet, in the first quarter of 2001. Midtown currently stands 40 percent above the quarterly average dating back to the fourth quarter of 1991. And yet, here’s one more figure for you: 91 percent of the direct availability in Midtown Manhattan is within the Class A segment of the market. Meanwhile, the future also gets a bit fuzzy, with everything from the yet-to-be-officially-available Condé Nast block in Times Square (as it relocates Downtown) to the Time Warner move away from Columbus Circle (and its future relocation to Midtown South’s Hudson Yards).
Okay, now that you’ve relocated yourself to a quiet cool bar with a gimlet in your hand contemplating the demise of Midtown, let’s look at the brighter side. The average asking rent for Class A space, not surprisingly, remains subdued in Midtown, closing at $66.10 per square foot in the second quarter, well below its high point of $84.29 per square foot in the third quarter of 2008. Down in Midtown South, meanwhile, the average asking rent is pushing $60 per square foot and closing in fast on its big brother to the north. This has already caused tenants to explore (and sign) deals in Midtown at equal or lesser price points for product of at least equal quality. With an abundance of availability in Midtown and a lack of it in Midtown South, don’t expect the trend to be a short one. Additionally, don’t think that the variety of financial services firms, large and small, will give up on Midtown either—that commute into Grand Central from Fairfield or Westchester is just too easy.
Of course, there is one additional issue to keep in mind while you order that second gimlet—Downtown Manhattan. Yes, that wild card continues to surprise, and with some 7.8 million square feet of Class A availability (now or in the not-too-distant future) just within World Trade Center and Brookfield Place (and at a lower price point), it could also elicit some second looks from up in Midtown.
Now back to last week’s episode and what really did happen at the dance …