Downtown landlords took advantage of the area’s growing popularity by re-pricing about 1.5 million square feet of the 12.2 million square feet available in the first quarter of 2014. According to newly released data from CBRE Group, the vast majority of this space — about 1.43 million square feet — was priced higher.
CBRE’s Peter Turchin said that the price gap between Downtown and the other two major markets, coupled with the influx of technology firms into the neighborhood, would likely see the trend continue.
About 1.62 million square feet of space was leased in Downtown in the first quarter of the year, a year-over-year increase of 18 percent, according to CBRE. The average asking rent stood at $48.70 per square foot, a year-over-year increase of four percent from $46.87.
“There is usually a lag between increased activity and the re-pricing of rents,” Turchin said. “We are now in the re-pricing phase of the market.” CBRE defined re-pricing as office space with a listed asking rent that changes in price during the quarter. Re-pricing doesn’t include new space placed on the market with an asking rent — or available space without an asking rent — that is then listed with a price.
The company’s data showed that landlords in Midtown re-priced 808,163 square feet of the 27.85 million square feet available during the quarter, with only 436,309 square feet, or 54 percent, priced higher. About 3.94 million square feet were leased in Midtown in the first quarter, a year-over-year increase of 38 percent. The average asking rent was $74.27, a year-over-year increase of seven percent from $69.58.
In the tech hub of Midtown South, landlords re-priced 609,964 square feet, with 478,219 square feet, or about 78 percent, priced higher. About 1.66 million square feet were leased in Midtown South in the first quarter, the greatest activity seen since the fourth quarter of 2001, when 1.76 million square feet were leased. Midtown South’s average asking rent was $63.05 per square foot, a year-over-year increase of five percent.
CBRE’s Sacha Zarba spoke about the strength of the tech industry, pointing out that the New York metropolitan area saw about $1.2 billion in venture capital funding in the fourth quarter of 2013, the highest quarterly total seen since 2001. He also pointed to the changing makeup of landlords in Midtown South, which was once the dominion of family-owned firms but is now increasingly controlled by institutional-level landlords such as SL Green Realty and aggressive players like RXR Realty and Extell Development. These landlords were likely to invest big in their buildings and push rents further north, Zarba said.
Overall, Manhattan saw about 7.2 million square feet of leasing activity in the first quarter, with an average asking rent of $64.40 per square foot.