Staying Relevant on Park Avenue
To hear some people talk about it, every building in the heart of Midtown is in danger of collapsing as the average age is, gasp, 63 years.
But there are a number of major properties in this part of Manhattan that are doing just fine. Many have undergone or are undergoing significant capital improvements to remain relevant in the age of new construction at Hudson Yards and the World Trade Center. And with the east Midtown rezoning “postponement” announced just last week (which would have allowed for some serious upzoning), I thought it a perfect time to take a look at one particular area that can relate directly to the above-mentioned issues: the Newmark Grubb Knight Frank Park Avenue submarket.
First of all, let’s confront the age issue. For Newmark Grubb Knight Frank’s Park Avenue submarket, the average age for all classes is currently 53, slightly younger than all of Midtown. If we drill down to just the Class A properties, which includes 35 of the 38 buildings we track along the corridor, the average age is a sprite 49. Among these 35 buildings, the current availability rate (all space being marketed) is 11.6 percent, the lowest figure since the 11.2 percent of November 2011. It had been as high as 17.3 percent just after the end of the “great recession,” though it does remain above our historical average of 9.9 percent. Sublease availability has eased recently, but direct availability remains elevated. The average asking rent is not yet back to the $100-plus-per-square-foot figure seen prior to the recession; however, certain buildings are attaining those prices.
Meanwhile, Park Avenue still manages to attract tenants, with the latest big deal being Capital One moving up the avenue from 90 Park to 299 Park, taking a healthy 250,000 square feet. There also have been numerous smaller deals among the hedge funds and private equity firms in the smaller boutique trophy buildings.
And it’s not as if the submarket has thrown in the towel as a result of that fancy new product to the west and south. Several upgrades and renovations have been ongoing, the most prominent being 280 Park Avenue where ownership is spending some $125 million inside and out. Other office buildings have gone under the knife too: 230 Park Avenue, 245 Park Avenue, 250 Park Avenue and 270 Park Avenue, among others. Even the Waldorf Astoria has gotten in on the action with a nice facelift.
There is one particular property in this submarket that likely would have benefited from the rezoning: 425 Park Avenue, a 650,000-square-foot tower built in 1957. It is still due for a complete gut renovation already, though more might have been done under the new plan.
In any case, all this drama about the “postponement” to rezoning may be moot; it will likely happen in some form eventually. And with its premier location just north of Grand Central, a fantastic streetscape and classic (but not really old) buildings, the Park Avenue submarket will remain relevant.