Doing business in New York or, for that matter, anywhere in the world is much more difficult if you don’t have all the facts and can’t figure out what will happen next.
Though the overall Manhattan office leasing market remains segmented in several submarkets, the landlord has the advantage. On Park Avenue South, from 16th to 32nd Streets, in the 2,000-square-foot to 10,000-square-foot range, there are just 33 spaces available on 17 blocks.
On Fifth Avenue between 14th and 23rd Streets, in the same size parameter, there are just eight spaces available. Prices have risen. Eighteen months ago, as agent for 461 Park Avenue South, MHP was making upper-$30s-per-square-foot deals. Now, MHP is making low- to mid-$40s deals. On lower Fifth Avenue in the Flatiron submarket, the same can be said. Eighteen months ago, as agent for 155 Fifth Avenue and 101 Fifth Avenue, MHP was making low $40s-per-square-foot transactions. An yet more recently, we have made multiple $60s deals.
The TAMI tenants—technology, advertising, media and information sectors—are looking near and far now as their priorities begin to change. The Downtown market is also picking up as prices rise, with the overall average rent in the low- to mid-$40s-per-square-foot and an 11 percent vacancy rate. The rule of thumb is that, when Downtown rents are more than $20-per-square-foot lower than Midtown rents, tenants start to seriously consider a move downtown. This rule is holding true, and savvy brokers have learned how to best protect their tenants with “post Sandy” office space.
Though blue-chip tenants on corporate row continue to struggle, due to events around the world, location remains the prime driver for this submarket. Two blocks from Grand Central? Excellent, Ten blocks? Fifteen-minute walk? Not so much.
There are millions of square feet of new, modern office space coming on line over the next several years. There is lots of competition for large credit tenants. Yet, here we are with so little information about our future. The race for New York mayor depends upon whether a 6-1 democratic voter roll will embrace the nominee who champions “tax the wealthy.” New York is among the highest-taxed municipalities in America. Is anyone confident about where our fiscal policy is headed? With the risks in Syria and the rising voice of Iran, what does this mean for the world economy? The debt limit talks, Obamacare, the possible government shutdown, interest rates creeping up, the rise of the part-time worker economy. It is remarkable that with so little clarity in the financial and political worlds, the New York office market continues getting stronger.
If you are an owner, are you making good market deals today or hoping for a better tomorrow?
Shutting down the government would have broad economic consequences, and the threat continues from one political crisis to the next. In this time of uncertainty and global strife, America has often stood up and been at her best. Yes, the American economy is slowly improving, and, yes, the New York economy leads the way, but the country is a long way from full recovery, and partisan politics continues to hold us back. It was Abraham Lincoln in 1858 who said about another subject, “A house divided against itself cannot stand.”
America, rise up and speak with one voice. Clarity sets us free.