Through May 2015, the Midtown office market demonstrated its resiliency by bouncing back after a slow start to the year. Although the market still has a year-to-date net absorption of negative 82,290 square feet, the market has almost absorbed the 998,000 square feet of negative absorption that hit the market in the first two months of the year. Three consecutive months of positive absorption for Midtown has dropped the availability rate back to the level it was at the end of 2014. Despite jumping to 10.1 percent in February, availability is back down to 9.7 percent through May.
This year, five of the nine Midtown submarkets contributed to the positive absorption. The Park Avenue submarket recorded the most positive absorption in 2015, with over 438,000 square feet absorbed. The increase in demand along Park Avenue dropped availability to 8.2 percent, down from a recent high of 11.3 percent just 13 months ago. The East Side/UN submarket posted over 321,000 square feet of positive absorption this year, which has led to the lowest availability rate in Midtown at 5.7 percent. Although the Grand Central submarket has the highest availability rate in Midtown, it posted the third strongest Midtown absorption numbers with positive 227,433 square feet. This has been a robust trend for Grand Central, recording over 1.9 million square feet of positive absorption in the past 19 months. The Penn Plaza/Hudson Yards submarket continues to be solid, with another 135,415 square feet of positive absorption, contributing to its 420-basis-point drop in availability over the past 12 months. Rounding out the five submarkets with positive absorption this year is the Fifth/Madison submarket, which rides its 62,542 square feet of absorption to record-high Class A asking rent of $125.12 per square foot.
Even with all of the positive momentum in these submarkets, the Fashion District and Sixth Avenue/Rock Center submarkets are holding Midtown back this year, with a combined negative absorption of 1.2 million square feet. Once these submarkets get on track, expect availability to reach sub-9-percent levels.
Richard Perischetti is vice president of research & marketing at DTZ.