Office leasing drought breaks
Two big office deals — each for more than 1 million square feet — provided a statistical lift that ended an extremely slow three-month leasing stretch in Manhattan.
Indeed, last month saw 4.9 million square feet of Manhattan office space leased, compared to 6.1 million square feet for all of January, February and March combined.
Contributing to the uptick was media giant Viacom, which signed a 15-year renewal and lease expansion last month that runs through 2031. The move will ultimately give the company the entire 1.6 million-square-foot office portion of SL Green Realty’s 1515 Broadway.
Also last month, Morgan Stanley signed a renewal-and-expansion lease at Brookfield Office Properties’ 1 New York Plaza in lower Manhattan — for 1.1 million square feet.
Other than those two mega deals, it was the small leases that provided the bulk of activity in the market, said Steven Durels, executive vice president at SL Green, on his company’s first-quarter earnings call late last month. He said demand is weak for midsize tenants, looking for between 25,000 and 45,000 square feet.
“But counter that with the small spaces — 5,000 to 6,000 square feet,” he said. “If nicely built, that stuff seems to be in very high demand.”
Overall, asking rents for Manhattan rose to $53.24 per square foot in April — a $0.17 per foot increase from the previous month, data from commercial firm Cassidy Turley shows. During the same period, the availability rate (measuring spaces that are vacant now or available over the next 12 months) tightened modestly by 0.1 points to 10.5 percent, the firm’s figures show.
“The market is flat right now,” said Greg Kraut, a principal at the Canadian-based firm Avison Young, which last month made headlines when its New York office hired veteran broker Arthur Mirante away from Cushman & Wakefield, where he once served as CEO.
Kraut said the overall leasing volume is lower this year because of the uncertainty of government policy prior to the presidential election in the fall.
At the very top of the Midtown office leasing market, companies continue to push rents up.
“What is really buoying [Midtown] is the top of the market,” Kraut said.
The investment firm Icahn Enterprises completed a 27,808-square-foot deal at the General Motors Building at 767 Fifth Avenue that had the most expensive starting rent since 2008, according to a little-noticed survey released last month by commercial firm Jones Lang LaSalle.
The deal was signed in the first quarter for $178 per square foot, the JLL survey found. That topped 2011’s high watermark: a $175-per-square-foot lease signed by home builder Hovnanian Companies in the same building.
Meanwhile, the Carlyle Group, the global asset management group, signed the fifth-priciest lease in 2012’s first quarter, according to the JLL survey. The company took 23,411 square feet at 520 Madison Avenue, with a rent starting at $122 per square foot.
But even as blocks of space have been spoken for in Midtown in the last few months — by Viacom, Icahn and the Carlyle Group — other spaces have been put back on the market.
Building owner Vornado Realty Trust listed two entire floors last month, totaling 188,814 square feet, at 100 West 33rd Street. The space was formerly occupied by Bank of America, a spokesperson for the lender said. There was no asking rent provided.
Overall, asking rents in Midtown ticked up by $0.16 per square foot to $61.01 per foot last month, while the availability rate remained flat at 11.1 percent, Cassidy Turley statistics show.
Even as large finance firms like Bank of America were moving out of buildings in Midtown, some high-powered (although smaller staffed) financial companies were taking space in Midtown South — largely to be closer to the tech and multimedia firms they often bankroll.
Bain Capital Ventures — the venture capital affiliate of private equity firm Bain Capital, cofounded by presumptive GOP presidential nominee Mitt Romney — inked a 3,500-square-foot deal on the eighth floor of 632 Broadway. The local office for the private equity firm Bain Capital remains at 590 Madison Avenue in Midtown, a spokesperson for the company said.
Nora Stats, the president of Tarter Stats O’Toole, which represents the landlord at the 12-story 632 Broadway, declined to comment on the Bain deal. But she said other financial firms have moved to the building, including hedge fund Serengeti Asset Management. And, she noted, Boston-based venture capital fund, Spark Capital, recently took the top floor at the nearby 138 Spring Street in Soho.
“They want to be near the tech companies,” she said, adding that the money managers who work at the financial firms also want to be near their homes in Soho and Tribeca.
Meanwhile, in the Meatpacking District, sources said fashion brand Alexander McQueen is expected to lease space in 22 Little West 12th Street at about $60 per square foot.
Jared Epstein, a vice president at Aurora Capital Associates, has been analyzing potential development options in the Meatpacking District.
“The freshest new retail concepts are in the neighborhood,” he said. “Where else would you want to be if you are an aspirational retailer?”
Overall, the Midtown South asking rent rose in April to $44.23 per square foot, up $0.54 per foot. The availability rate fell by 0.4 points to 8.6 percent, Cassidy Turley statistics showed.
Morgan Stanley’s Downtown deal provided a huge boost to the market.
It included an 816,000-square-foot renewal, plus a 337,000-square-foot expansion. The latter lease does not begin until October 2013, CoStar data showed.
Despite growing its footprint in the 50-story, 2.5 million-square-foot 1 New York Plaza, the availability rate in the tower remained high — with a block of nearly 415,155 square feet on the market, all of it above the 42nd floor, CoStar showed.
Downtown was the only market where asking rents declined last month, Cassidy Turley figures showed. The average asking price fell by $0.71 in April to $38.08 per square foot. However, in a sign the market was tightening, the availability rate fell by 0.2 points to 10.8 percent, the firm reported.
Avison Young’s Kraut, speaking about Manhattan overall, said landlords were getting nervous about larger blocks on the market.
“Big blocks tend to drive the market. So some of the bigger landlords with lots of space in the bottom of the buildings are getting nervous now,” he said. But not nervous enough to pare back rents.
“You don’t see much price-cutting at all. But there may be additional incentives,” Kraut said.
COMPANIES AND PEOPLE