The pending federal election slowed down rental activity while companies waited to see the outcome. Now Hurricane Sandy has put a crimp on rental, as firms regroup while awaiting power and recovery from water damage. There is still limited power below 39th Street and east of 6th Avenue. The outage affects some 200 million square feet of residential, commercial and industrial properties.

New York Market Overview

  • Total Manhattan Class A Office vacancies stayed at 8.9 % vacant
  • Total New York City Office vacancy stayed at 7.6 % vacant
The office vacancy rate in Midtown jumped to its highest level since late 2010 as big blocks of space hit the market and {dynamic_word2} activity remained slow. Midtown saw its vacancy rate jump by 0.7 points in the third quarter, compared to the previous quarter to 10.5 percent. It was the highest figure since the fourth quarter of 2010, when the vacancy rate was 10.6 percent.More than $5 billion are now available for {dynamic_word4} including two buildings, 11 Madison Avenue and 825 Eighth Avenue that are expected to fetch more than $1 billion each. If either sells before Dec. 31, it would easily break the record for the most expensive {dynamic_word4} of the year. Now, the values of prime properties, which fell 38 percent in the recession's early years, are within 4 percent of the highs recorded in 2007. Increased values are tied to ever-lower interest rates and more readily available credit. In a turn-around, midsize commercial real estate players that bought properties at the bottom are the ones selling today, as opposed to bigger names which made similar moves in the 1990s.

Five large tenants, accounted for nearly a fifth of all relocation leases signed so far this year in the city's tightest market, Midtown South. The tenants, retailer JCPenney, New York University, advertising firm Havas, research-focused New York Genome Center and Weight Watchers International, each took more than 100,000 square feet for a total of about 17.9 percent of the 3.9 million square feet leased in Midtown South so far this year.
Midtown South has become New York's hub of new technology and media. But with available office space in the area growing scarce, tech activity is moving north, causing some to predict that the traditionally stodgy Midtown market could become (at least a little) hip. Midtown South has outperformed other Manhattan markets over the past two years, with the sharpest rise in asking rents and the steepest decline in availability. This is driving some tech tenants to consider lower-priced, postwar office buildings in Midtown.

Office rents are rising near Bryant Park and that area is outperforming the rest of Midtown. Bryant Park's vacancy is at just 3.8 percent in the second quarter of 2012, a third of Midtown's 11.5 vacancy rate. In that same period, rents around the park were $78.29 per square foot, compared to Manhattan's $63.40 average rent per square-foot. Bryant Park stands in particular contrast to the traditionally strong Plaza district, which has been seeing high vacancy rates.
On the residential side, penthouses have {dynamic_word3} rather fast in 2012. However, commercial penthouses are not moving nearly as fast. More than half a dozen office penthouse spaces in premiere Midtown buildings have sat unoccupied for more than a year. The average asking rent for an office penthouse rent in that market is $158 per square foot, though some have begun to offer discounts.

For the next three years, Times Square from 42nd street to 47th, including Broadway and Seventh Avenue, will be torn up and repaved, at a cost of $40 million. There will be certain infrastructural changes that go along with it, including the removal of trolley tracks that now lie buried under the asphalt of Times Square. Some of the changes include the introduction of energy outlets that will remove the need for those generators that accompany the big events that increasingly occupy the site.
The five most expensive sales recorded last month were valued at $1.46 billion. The top two commercial transaction was an office building 450 Lexington Avenue at East 45th Street for $720 million. The next highest {dynamic_word4} was the 518-unit Essex House hotel at 160 Central Park South, from Dubai Investment Group for $362.3 million.
The Financial East area is no longer just about big banks, law firms and insurance tenants. A flood of technology, new-media, architecture and other creative class tenants have begun to move into the area, a change that is boosting Lower Manhattan's residential market as well. Rents are cheaper than Midtown South which is a major draw for creative firms. As these companies grow, they are growing out of their mid-block buildings and are being attracted by rents that are 10 to 15 percent less than what they're finding in Midtown South.
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