Midtown South as Relief Valve
Midtown South has been so hot lately it seemed just about ready to boil over. But April brought some relief in the form of additional blocks of space all across the submarket. In fact, each of the nine districts that make up Midtown South recorded an increase in their availability rate for the month.
For all of Midtown South, the availability rate jumped back to double digits to close at 10 percent in April, up from 8.8 percent in March. One doesn’t have to go back too far to find a higher availability rate for the area—just to December, when the figure was 10.3 percent. But with TAMI (technology, advertising, media, information) firms red hot and still growing, it might come as a surprise that the figure rebounded just one month after hitting its lowest point since September 2008, when the availability rate was 8.6 percent.
So where is this extra availability? Well, it mostly takes the shape of five properties that added at least 100,000 square feet each to the market. The blocks range in size from 473,000 square feet in Flatiron/Union Square to 146,000 square feet in Penn Station. All told, these five properties alone added 1,180,000 square feet to availability. In addition, there were three other properties that just missed this 100,000-square-foot cutoff.
The next logical question is: Why all this availability now? To be honest, this extra availability seems to exist due to a random combination of factors: Tenants are relocating, long-standing buildings that had been off the market have recently been sold, and four out of the five 100,000-square-foot-plus blocks are in buildings that are undergoing massive renovations. The landlords and agents of these buildings are targeting a wide variety of tenants, especially TAMI firms that want loft-style properties but with all the modern bells and whistles.
This brings us to the final question: When will all of this space be available? It turns out that some of the spaces are being marketed for occupancy this year, although three of the five 100,000-square-foot-plus blocks are quoting a 2015 move-in date.
Finally, lest we forget, besides the existing properties mentioned above, new construction is underway in Midtown South that will bring additional properties into the mix: 1045 Avenue of the Americas in the Times Square South district (2015) and the Hudson Yards complex in the Penn Station district (2015 and beyond).
So yes, the Midtown South availability rate did climb in April. But that’s mostly because landlords are trying to take advantage of a hot submarket by renovating to appeal to the numerous tenants still circling the area. This has created a bit of a relief valve—for the time being.