Midtown South is the only market that maintained its positive momentum from 2014. In just the first two months of 2015, Midtown South’s availability rate dropped another 50 basis points to 6.5 percent and brought its year-over-year total decline to 120 basis points. With availability at its lowest in more than eight years, asking rents continue to reach new record highs. Average Class A asking rents are up 3.5 percent to $75.78 per square foot, as all five Midtown South submarkets averaged north of $70 per square foot for the first time in history. Class B average asking rents soared 11.4 percent from one year ago to $67.62 per square foot, shattering the previous high of $50.61 from 2008.
With Midtown South outperforming the rest of Manhattan and achieving all-time record rents, which submarkets have performed the best? Madison Square/Park Avenue South by far showcased the strongest performance of the five Midtown South submarkets over the past 12 months. It ranked first in both total decline in availability and square footage leased as a percentage of the total market size, and this submarket also ranked second for Class A and Class B average asking rent increases. The Madison Square/Park Avenue South availability rate dropped 270 basis points to 7.0 percent over the past year, with the Hudson Square/Tribeca submarket coming in a close second place with a 210 basis-point-drop to 4.9 percent. Madison Square/Park Avenue available supply dropped as over 3.4 million square feet were leased in the past 12 months, which accounted for 13.0 percent of the submarkets total inventory. Soho/Noho/Village ranked second in leasing activity as a percentage of its inventory size at 10.1 percent.
This high demand for space in this submarket has caused Madison Square/Park Avenue South to have strong asking rent increases year-over-year. Madison Square Class A asking rents increased 7.8 percent to $70.16 per square foot, second to only Chelsea’s 12.5 percent increase to $90 per square foot. Madison Square/Park Avenue South’s Class B asking rents had stronger increases, jumping 9.2 percent to $63.21 per square foot. Flatiron/Union Square Class B asking rents posted the highest percentage increase year-over-year to $74.34 per square foot, a 15.9 percent increase.
Although all five submarkets are doing well, Madison Square/Park Avenue South had the strongest past 12 months.