Midtown Madness Part II – 14.8 Percent
Last week we saw the Penn Plaza/Hudson Yards submarket score two major upsets to make it into the final four and the Fifth/Madison submarket start its path as a repeat Midtown Madness Champion. Let’s see which submarket has what it takes to be the winner this year.
As we move into the second round, the scoring criterion changes to the largest increase in overall average asking rent over the past 12 months. The West Region continues to be dominated by the “nobody believed in us, we are too small” Penn Plaza/Hudson Yards submarket. In its third upset of the tournament, Penn Plaza/Hudson Yards posted a 9.3 percent increase in overall asking rents to $60.44 per square foot. This submarket completely outmatched the Fashion District, which only posted a 1.8 percent increase to $53.13 per square foot.
In a tightly contested East Region, the first-seeded Grand Central narrowly edges out last year’s champion Fifth/Madison. Grand Central posted a 6.1 percent increase in overall average asking rents to $68.08 per square foot, while the Fifth/Madison submarket only posted a 4.3 percent increase to $109.46 per square foot.
So the finals are set: It will be David vs. Goliath, as the smallest Midtown submarket, Penn Plaza/Hudson Yards, takes on the largest submarket, Grand Central, out for Midtown submarket supremacy!
The finals are decided by most leasing activity as a percentage of total market size. In the Penn Plaza/Hudson Yards submarket, over 2.1 million square feet was leased over the past 12 months. This equals 14.8 percent of the submarkets total inventory, which was fueled by the signing of seven leases greater than 100,000 square feet. Will this be enough for Penn Plaza/Hudson Yards to continue its Cinderella story? The top-seeded Grand Central submarket totaled over 3.6 million square feet of leasing activity year-over-year. Despite signing five leases each greater than 100,000 square feet, leasing activity only accounted for 7.4 percent of the total market size.
This allows the Penn Plaza/Hudson Yards submarket to complete the improbable underdog story, as it upsets all the other Midtown submarkets to become the 2015 Midtown Madness Champion!
Richard Perischetti is vice president of research & marketing at DTZ; firstname.lastname@example.org.