Through three quarters this year, healthy market fundamentals continue and asking rents remain on the rise across all markets in Manhattan real estate. Despite rental increases being slightly off the pace of 2013—overall Manhattan asking rents increased only 4.5 percent through September this year compared to 6.8 percent for the same time period last year—many areas have already surpassed historical highs.
Class B asking rents remain strong in all three major markets. By the end of the third quarter, Midtown South Class B asking rents surpassed $65 per square foot for the first time ever, averaging $65.50. Over the past year, Midtown South Class B asking rents are up 9.1 percent, increasing at a slower rate than the 12 months prior when they surged 21.4 percent. At $60.35 per square foot, Midtown Class B average asking rents reached above $60 for the first time in 24 quarters. This marks a 6 percent increase over the past year, a slower increase compared to the 12 months prior when Class B rents rose 20.8 percent. Downtown Class B asking rents were stagnant last year, but this year they are up 11.6 percent, to $41.72 per square foot.
During the current real estate cycle, Midtown South Class B asking rents surpassed Midtown Class B in 2011 and never looked back. Since then, Midtown South Class B asking rents are up 60 percent, compared to Midtown Class B rents, which increased 40 percent. In addition, Midtown South Class B asking rents are now more expensive than the historical highs reached for Midtown Class B asking rents in 2007. In the fourth quarter of 2007, Midtown Class B asking rents peaked at only $64.76 per square foot. Back then, Midtown South Class B asking rents were 31.4 percent less than Midtown, while today, they are 8.5 percent higher.