Tenant Migration Leads to East Side/UN Low Availability Rate
This Fourth of July, Macy’s 38th annual fireworks show is heading back to the East River for the first time in five years. In honor of this move, let’s take a look at the Midtown submarket that currently has the lowest availability rate, the East Side/United Nations. At 6.5 percent, the East Side/UN availability rate is 90 basis points lower than Midtown West/Columbus Circle—the submarket with the next lowest availability rate in Midtown. Additionally, the available supply in the East Side/UN submarket accounts for only 5.1 percent of the overall available space in Midtown.
The low availability rate in this submarket can be attributed to tenant migration from the Grand Central submarket. In fact, in 2014, 49 percent of this submarket’s leasing activity came from tenants relocating out of Grand Central and into the East Side/UN. Grant Thornton’s 130,350-square-foot lease at 757 Third Avenue and Troutman Sanders’ 87,126-square-foot lease at 875 Third Avenue highlighted this trend, as both tenants found value with Class A average asking rents 8.1 percent lower than in Grand Central. Only two spaces greater than 100,000 square feet are currently on the market, totaling less than 300,000 square feet combined, and account for only 2.7 percent of the available big-block supply in Midtown.
Since January of last year, the availability has steadily declined, and is down 270 basis points from a high of 9.2 percent. Although the leasing activity over this time totals only 1.6 million square feet, it accounts for 7.7 percent of the submarket’s 21.1-million-square-foot inventory. The leasing activity has been dominated by the professional services and financial services industries, as they accounted for almost two-thirds of the leasing volume within the East Side/UN submarket. The legal services industry has been active as well, representing almost 55 percent of the professional services firms that leased space. Tenants in the tech/advertising/media/information (TAMI) fields have also made their way into the submarket, and accounted for 10 percent of the leasing activity, while the government sector surprisingly only accounted for 4 percent.
Here’s to everyone having a happy and safe Fourth of July!