Asking Rents: Up, Down and Flat


Talk to brokers about asking rent and some will tell you that it is a worthless statistic compared to effective rent, which shows where a leasing transaction is actually trading in the market. I agree up to a point: That data is invaluable, which is one reason NGKF has been tracking it for years now.

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The problem with effective rent is that it does not lend itself to apples to apples comparisons. After all, every building and every deal is different, and leasing transactions closing month-over-month can vary wildly within the same building. For instance, you might record a 500,000-square-foot deal closing one month and the following month everything closing is below 25,000 square feet (even deals of the same size may be subject to terms that are all over the place). This is where the average asking rent comes in handy—it is, quite simply, a great tool for tracking a trend. And it is rather easy to dig down and see why the figure is rising, falling or remaining flat.

With all of that said, let’s take a quick look at Manhattan Class A average asking rents by submarket over the past month and the past year:


Class A Avg. Asking Rent                                     May-14              Apr-14           May-13
Midtown                                                                  $75.85                $75.44              $75.65
Midtown South                                                      $66.44                $65.14              $69.92
Downtown                                                              $54.05                 $55.52             $46.24
Manhattan                                                              $68.94                $68.00             $68.09

As you can see, the Midtown average asking rent has more or less been flat, or moved sideways if you will. Certainly some districts, such as Park Avenue and Upper Fifth/Plaza, are priced much higher than that average. But there are also districts where pricing had its challenges due to stubbornly high availability rates, especially for Midtown. Whether space will “move” as pricing rises in other parts of Manhattan (see below) remains to be seen.

Midtown South is an interesting submarket for a variety of reasons, including pricing. This past year, its average asking rent actually fell 5.0%, but this has much to do with the space that was leased that time, including 51 Astor Place, which was listed at a very steep figure for the area (and for good reason). But you will also notice that pricing is on its way back up, especially within the past month, rising 2.0% as renovated buildings come online.

Which brings us to Downtown. The Class A average asking rent has risen in this submarket more than in the other two by a wide margin. Over the past year, this figure has risen 16.9%. The reason for the jump is simple—4 World Trade Center was included in availability late last year, and with the addition of that trophy building and its 1.0 million square feet of vacant space, up the pricing went. Within the past month, there was a drop in the average asking rent thanks to the Time Inc. lease of 700,000 square feet at Brookfield Place, another property with asking rents on the high end. Moving ahead, the figure is likely to climb a bit higher as 1 World Trade Center is added to inventory later this year. It could be offset slightly by less expensive space to be added on the east side of Downtown, however.

So, there you have it: a quick rundown of the average asking rent by submarket in Manhattan. Yes, effective rents can tell an incredibly compelling story, but the average asking rent is a great method of looking at a market or submarket and reviewing a trend as well as developing a forecast—but more on that another time.