Don’t Count Midtown Out
It’s in vogue these days to point to the strength of the Manhattan office market below 34th street and discount the importance of the Midtown Manhattan office market. Certainly, there has been strong growth in demand leading to healthy rent increases in Midtown South and the markets below 34th Street have seen strong leasing activity over the past nine months. But Midtown was also an active, dynamic market during the first half of 2014. The volume of new leasing in Midtown topped 9.3 million square feet in the first half of the year, making it the best six-month period for new leasing since the first quarter of 2011 when more than 11.3 million square feet was leased. Total Midtown new leasing volume in the 1H14 was 26.3 percent higher than the volume of Midtown South and Downtown combined.
The knock on Midtown is that it is “your father’s office market,” meaning the buildings and the tenants that occupy them are more appropriate for firms of the Mad Men era rather than those of the TAMI (technology, advertising, media and information) era. But some of the biggest transactions in Midtown during the first half of the year were made by TAMI firms, from Time Warner to Publicis to tech stalwart Cisco. And while the population of New York City continues to grow (the Census Bureau just reported that the population of New York City reached a new record high as of July 2013) the proximity to major transportation hubs means Midtown office space can serve companies whose work force lives in the suburbs as well as the city.
Rents in Midtown are rising. Since the market recovery began in early 2010, asking rents in Midtown have increased by more than 14%. Of the 28 central business districts tracked by Cushman & Wakefield, Midtown’s increase since the first quarter of 2010 is the 11th highest. That trails such tech meccas as San Francisco and Boston–not to mention Midtown South, which comes in at No. 2–and energy centers such as Houston and Dallas. But Midtown continues to see steady growth in rents driven by rising demand in a growing city.
So let’s not give up on Midtown. It is, by far, the largest office market in the U.S., with more than 241 million square feet of office space. The Midtown market is in fact larger than the next two markets (Chicago and Washington D.C.) combined. We expect Midtown to continue to perform well and to remain an attractive location for businesses both small and large. As long as the Manhattan economy is doing well, the Midtown market will do well.