Midtown South’s Weakest Link
The Madison Square/Park Avenue South submarket availability rate is 9.5 percent, and this submarket is outperforming the overall Manhattan market’s availability rate of 10.8 percent. However, with 2,528,505 square feet of available space, this submarket accounts for 37.9 percent of Midtown South’s available supply. With Midtown South availability tightening to its lowest level since 2006, why is this corridor holding Midtown South back?
One reason is that eight buildings in the Madison Square/Park Avenue South submarket have 100,000 square feet or more available, compared to only nine buildings in the other four Midtown South submarkets combined. In fact, of the 17 submarkets in Manhattan, only four others—three in Midtown and one in Downtown Manhattan—have more buildings with 100,000 square feet or more available.
Of these eight buildings, four are Class A and account for 62 percent of the Class A inventory within this submarket. They also happen to be some of the priciest buildings in the Madison Square/Park Avenue South submarket, as asking rents average $62.39 per square foot, $1.49 higher than the Class A average. Low demand for Madison Square/Park Avenue South buildings has kept asking rents in check as it is the only Midtown South submarket with Class A and Class B average asking rents under $70.00 and $60.00 per square foot, respectively.
But not all is negative in Madison Square/Park Avenue South. Two mega deals were signed to start off 2014, as Credit Suisse recommitted to 1.2 million square feet and Sony migrated from Midtown into 520,000 square feet at 11 Madison Avenue. Also, the availability rate has been on the decline over the past three months since it topped out at 11.2 percent in November 2013.