By Al Barbarino
The Manhattan real estate market puttered along through the second quarter of 2012, as Midtown South continued to attract most of the attention.
Speaking at the CBRE’s Q2 2012 Manhattan Office Market Review last week (Thursday), company executives outlined Manhattan’s slow progress through June of this year, but highlighted Midtown South’s continued success.
Matt Van Buren, president of the firm’s tri-state region compared the three major business districts to children, calling Midtown the “oldest child,” with some “really good things about it, but some real issues.”
Midtown’s leasing activity through June, at 5.71 million square feet, was 42 percent below 2011 levels. Availability increased, thanks in large part to 717,000 s/f of space that hit the market at 250 West 55th Street, as rents ticked up one percent to $64.56 psf.
“We’re going to continue to bump along,” Van Buren said. “There’s no sort of disruptive supply or demand factors that are going to hit in the second half of this year in Midtown.”
In Midtown South, the “prodigy child” and the “shining star of the family,” the picture has been much different for the last 18 months and counting.
June leasing activity surpassed the five-year average in Midtown South by 41 percent, with year-to-date activity of 2.57 million square feet on par with last year’s strong performance.
“If you just hung out in Midtown South it would feel like 2007 — which I’m inclined to do every so often because it was a really good time,” Van Buren said.
CBRE EVP Ben Friedland and SVP Sacha Zarba stepped up to outline the extent of Midtown South’s growth, and to put a few numbers on it.
New York City was the only major tech hub, including Silicon Valley (highly
regarded as number one) and Boston, to see an increase in venture capital-funded deals between 2007 and 2011, their data revealed.
Well over 1,000 web-based tech startups emerged (with 486 getting some type of venture capital funding) during that period.
Much of the success is due to the changing definition of a tech firm. It’s no longer just about building new technologies, but applying technology to existing industries — many of which reside in New York City.
“In the past, technology was about hardware, building computers” Friedland said. “Now… when you think about all the companies that these technology companies are trying to get to — the advertising firms, the financial firms, the media firms — all of their headquarters are here, so it’s logical that the sales force of these tech firms need to be in New York.”
They painted an optimistic picture, despite obstacles that exist and will likely become more pronounced in the Midtown South market — such as limited availability, rising prices, and the desire for short-term spaces, which could drive some companies to the boroughs.
Downtown, the child with unrealized potential, is “just about to have a growth spurt,” according to Van Buren.
“Demand has been modest, plugging along,” Van Buren said. But, he added, “It’s an interesting moment down there.”
The fourth quarter will bring a large increase in supply due to the emergence of One World Trade Center and the World Financial Center; the greater quality space will not only increase availability, but also pricing, Van Buren said.
Overall, Manhattan logged 10.31 million square feet of leasing activity through June of this year, compared with 15.69 square feet during the same period last year. New availabilities, up 11.2 percent year-to-date, combined with below-average leasing, resulted in negative 540,000 s/f of absorption.
Average asking rents still rose by $0.69 to $55.64 psf.