Since peaking at 13.2 percent in April of this year, the Plaza District’s overall availability rate finally began to drop. At 11.2 percent, availability is down 200 basis points in the last five months, as the most expensive submarket in the country finally had some significant activity.
Despite the Plaza District’s availability rate being significantly above the overall Midtown rate of 9.9 percent, and tied for the second highest availability rate in New York City, behind only the Grand Central submarket, Class A asking rents continue to rise in the submarket. Plaza District average Class A asking rents reached $116.28 in the third quarter, and are just $0.57 per square foot off the historical-high rent recorded in 2007.
The recent decrease in the available supply has caused the gap between asking rents and taking rents to narrow, making leases more expensive for tenants. In 2013, Plaza District Class A direct taking rents were averaging almost $13 per square foot below the asking price, while in 2014, that difference has narrowed by $2.30 to only $10.67 per square foot. Class A taking rents have increased at a higher rate this year, up 8.8 percent to $105.61 per square foot, and are up $8.51 per square foot compared to 2013. But Class A asking rents have only increased 5.6 percent in 2014, up $6.21 per square foot to $116.28.
In the third quarter, Class A taking rents averaged $108.23 per square foot, the highest quarterly average in the Plaza District since 2008. In fact, taking rents averaged over $100 per square foot all three quarters this year, yet, the total leases signed north of $100 per square foot in the Plaza District dropped. Only 23 new leases were completed in 2014 compared to 32 through the same time last year. Although this may seem counterintuitive, new leases starting below $100 per square foot are rising as well, jumping more than $5.50 per square foot this year to $83.49.