By: Benyamin Davidsons
Midtown South has put the pandemic behind it with rising office rent prices.
As reported by Crain’s NY, Midtown South has seen such a greater improvement comparatively, that for the first time in history its rents are higher than overall Midtown. A recent report from Colliers shows that asking rent in the Midtown South submarket have grown 1.7 percent since the fourth quarter of 2021, up to $79.95 per square foot. At the same time, Midtown’s overall asking rents have dropped to $79.67, allowing for the role reversal. Midtown South can now also boast that it is the only submarket in Manhattan office to beat its March 2020 average rent of $77.95. The increase in rent prices in the area is being attributed to the more expensive buildings that have hit the market, including 10 Hudson Yards, 63 Madison Ave. and 88 University Place, as per the report. There are also new construction buildings in the neighborhood are going for higher prices.
The historic price surpass does not come as a surprise to some. “Many of us were wondering not if but when that submarket’s rents would surpass the overall market,” said Frank Wallach, an executive managing director at Colliers. It used to be that Midtown South had a lot less Class A office space than Midtown. Now, the tech sector expansion is mostly centered into Midtown South adding speed to the neighborhood. Between 2012 and 2021, over 50 percent of all tech leasing activity was in Midtown South. Last year, that figure rose to 60 percent. Google, Facebook, LinkedIn, Microsoft, Apple and IBM, have all taken on office space in the downtown area.
As per Crain’s, in Midtown, overall leasing activity fell by close to 20 percent and sublet supply increased by 330,000 square feet since the fourth quarter of 2021. In Midtown South, leasing was down just 9.3 percent, while sublet supply fell by 130,000 square feet. Midtown South leased 20 percent more space since the previous quarter, making for its second-strongest quarter in terms of leasing activity since the start of the COVID-19 pandemic. Prices, however, continued to drop, dipping 0.7 percent to $59.70 per square foot. Supply in the downtown submarket continued to increase, rising to 660,000 square feet, bringing the area’s share of sublet space up to 25 percent of the total availability.
