Stat of the Week: 250 Basis Point Drop
Hello, folks, it’s time for the fourth annual Stat of the Week Midtown Madness tournament, and like the NCAA March Madness tournament, there is always potential for a heavy favorite to get knocked out early, like Villanova and Duke in the second round. Last year’s champion, Park Avenue, will have a difficult time repeating in 2017, as a few submarkets in the west bracket performed well. One change this year is the placing of the Madison/Fifth Avenues submarket into the east region, which is an advantage for this submarket, as it will not have to participate in the play-in game to make the tournament.
Since there are nine submarkets and five of them reside in the east region, the two smallest submarkets, East Side/U.N. and Murray Hill will have a play-in game. This game will be decided by the highest percentage of lease renewals based on the submarket’s total size. The East Side/U.N. submarket had 532,382 square feet of renewals completed over the last 12 months, equal to 2.5 percent of its total inventory. Murray Hill only had 96,935 square feet of lease renewals—less than 1 percent of the market inventory. This allows East Side/U.N. to make it into the tournament and try to pull some upsets against some bigger Midtown submarkets.
The first round of the tournament will be decided by largest year-over-year decline in vacancy, and each submarket will be seeded in its region by total inventory size. The Elite Eight starts off in the east region, as the No. 1-seeded Grand Central is off to a slow start, with a vacancy increase of 90 basis points to 11.5 percent. This allows the number four-seeded East Side/U.N. to score an easy first-round upset. Despite vacancy rising in the East Side/U.N. submarket as well, its increase was only 20 basis points to 6.1 percent. The No. 2-seeded Madison/Fifth submarket comes out strong in the first round, with a 250-basis-point drop to 10.8 percent, which is too difficult for Park Avenue to respond to this year. Park Avenue loses its bid to repeat as champion, as its vacancy increased 110 basis points to 11.2 percent.
The west region is led by the No. 1-seeded Sixth Avenue/Rock Center, which played a sloppy first-round game, as vacancy climbed 380 basis points to 10.9 percent. Luckily for the west’s No. 1 seed, No. 4-ranked Penn Station performed worse, with a 430-basis-point increase in vacancy to 10.2 percent. Both the 2- and 3-seeded submarket in the west performed well in the first round, but the No. 2-ranked West Side vacancy rate decreased 210 basis points to 8 percent compared with the No. 3-seeded Times Square South, where vacancy dropped only 70 basis points to 8.8 percent.
Come back next week to read if the East Side/U.N. submarket will continue its Cinderella story and win the Midtown Madness Tournament!
Richard Persichetti is the vice president of research and marketing at Cushman & Wakefield.