Stat of the Week: 10.8 Percent
Is Midtown South losing its 'It' factor? In vacancy and rents the answer is not great
As an avid Stephen King fan and someone who loves a good scare, I was ecstatic when I found out there was going to be a remake of the movie It. There was one particular scene in the remake with two of the characters needing to choose an exit between three doors that had ominous labels. This scene made me think of how Midtown South performed this year, as some statistical trends are “very scary,” some are just “scary” and some are “not scary at all.” So in the spirit of Halloween and this week’s Midtown South-themed issue, let’s examine some of the scary and not-so-scary trends that floated by this year.
Midtown South’s office market vacancy rate remains 70 basis points higher than year-end 2016 at 7.3 percent, due to a 90.4 percent increase in the available sublease supply. This equals two very scary things:
Midtown South investment sales for core product types are down 21.4 percent year-over-year through the third quarter with only 114 properties traded. The drop in property trades kept the total sales volume down by 15.5 percent during the same time period with $3.4 billion in dollar volume.
On a slightly less frightening note, overall asking rents decreased this year by just 2.3 percent to $69.23 per square foot. Overall leasing activity is down 2.5 percent year-over-year with only 3.8 million square feet leased, mostly due to Class A activity dropping by 26 percent.
Not Scary at All
Midtown South Class B leasing activity is up 10.8 percent compared with one year ago with more than 1.7 million square feet leased. Although TAMI leasing is up 1.1 percent year-over-year throughout Manhattan, leasing is down in this sector, as its dominance in Midtown South was washed away with the S.S. Georgie this year. Three industries significantly increased activity through the third quarter with the retail and wholesale industry leasing up by more than six times its output from one year ago with 249,241 square feet leased. The real estate sector posted an 82.9 percent increase with 195,659 square feet leased. The financial services industry jumped to the second-ranked industry in Midtown South this year after posting a 21.4 percent increase in activity with 309,481 square feet leased.
On the investment side, despite a decline in the number of properties sold and dollar volume, Midtown South outperformed Midtown and Downtown this year, surpassing the total number of properties sold in both markets combined by 60.6 percent.