North, south, east and west, Manhattan’s commercial properties are flexing their muscles and commanding brawny prices.
“There really isn’t a bad submarket anymore,” declared Richard Farley, executive vice president and COO of Handler Real Estate. “Anywhere from the Meatpacking to Harlem there is healthy activity and rent levels. Downtown is benefitting from the Midtown South and lower Fifth Avenue rent levels being prohibitively high, and of course the development of the World Trade Center. And on the West 30s there is a tremendous amount of growth with the Hudson Yards.”
Observed Steve Witkoff of the Witkoff Group, “Conditions are good, and the city is in a good place.”
Downtown is expected to be the focus of more leasing as tenants seek value and marvel at the reinvention of the area’s transportation.
“The moons are aligned for a great 2014,” said Bradley Gerla, executive vice president with CBRE, ticking off the new projects from the Trade Center to the transportation centers. “Clearly you have a flight to quality, and downtown is benefitting.”
Everybody is moving from Midtown and Midtown South, said Jeffrey Lichtenberg, executive vice president, Cushman & Wakefield about downtown’s leasing velocity. “We have a ton of activity at 40 Wall St.”
The increase in tours and leases has also bumped asking rents 15 to 20 percent to the mid-$40s per foot in the tower of the Trump Organization-owned building. In its base, rents went from $32 to $37 per foot.
Even though cheaper space has been absorbed, there are tenants looking up and down Water Street. John Wheeler, managing director of Jones Lang LaSalle, said, “It’s just a matter of where they land.”
At One World Trade Center, tours have switched over from the curious to the serious, said its director of leasing, Eric Engelhardt of the Durst Organization, who is overseeing the lease-up along with a Cushman & Wakefield team led by Tara Stacom. Availabilities range from 3,000-square-foot pre-builts in the $60s a foot, to more for a block of 770,000 square feet.
Represented by a CBRE team, the advertising media agency GroupM signed a new 516,000-square-foot lease in 3 World Trade Center, enabling Larry Silverstein to finance and continue to build the new 80-story tower.
Across West Street, a Studley team represented Jones Day in making the leap to 330,000 square feet at 250 Vesey St. at Brookfield Place.
But downtown still suffers from those who lack the vision for paradigm change.
“Those that see it are all over it,” said Peter Riguardi, President, Jones Lang LaSalle. “They see the transit and the sexy neighborhoods like TriBeCa to the north.”
Riguardi noted that, in particular, Midtown West is also very strong. His colleague Mitch Konsker, Vice Chairman of Jones Lang LaSalle agreed but expects a “slew” of deals to gobble up spaces along Midtown’s east side.
In East Midown, Simpson Thacher & Bartlett renewed a 575,000-square-foot lease at 425 Lexington Ave. through a CBRE team. As a result, the 748,300-square-foot tower was sold in a deal represented by CBRE and Eastdil Secured for $658 million from Hines to JP Morgan Asset Management.
Last fall, together with colleagues Frank Doyle and Benjamin Bass, Konsker completed a high-end deal with Lakewood Capital Management at 650 Madison Ave. The 7,500-square-foot lease was inked at “north” of $150 per foot, a high for the building that had just been purchased for $1.29 billion by Vornado Realty Trust, Oxford Properties Group, Highgate Holdings and Crown Acquisitions. Evan Margolin from Studley represented the tenant in the move, which “shows the strength of the high-end market,” said Konsker. “It is very vibrant.”
A shortage of large blocks of at least 100,000 square feet is also driving the market, said Konsker.
The high-end Carnegie Hall Tower on W. 57th St. also has three more deals north of $100 per foot underway. Owner TF Cornerstone also has a floor coming up at 645 Madison Ave. and is expecting the right tenant will pay “north of $100,” said Palmer “Chip” Sealy III, its vice president of commercial leasing.
Rising Midtown South rents are sending tenants scrambling to do more with less, said Gregg Lorberbaum, principal, Centric Real Estate Advisors. He is working with tenants seeking 20,000 to 150,000 square feet and getting calls from brokers “very aggressively” pursuing the tenants. “My clients are hedge firms, financial firms and fashion, and they are more willing to move now depending on the installations,” he said.
Lexington Ave. through a CBRE team. As a result, the 748,300-square-foot tower was sold for $658 million.Christian Johnston
The whole building was vacated this month except for the TF Cornerstone headquarters floors at 387 Park Ave., in Midtown South, and is being entirely renovated with designs by architect Moed de Armas & Shannon for a new rooftop deck and conference area, new façade and machinery.
Asking rents are in the high-$50s to low-$60s and if someone wants their floors, Sealy declared, “We are in the wind.”
While he sees continued activity, Anthony Malkin, President and CEO of Empire State Realty Trust, says there is pressure in the Sixth Ave. and Third Ave. markets. Their portfolio, which includes the Empire State Building, “continues to attract quality tenants,” Malkin said.
The Himmel + Meringoff Properties are also seeing rising rents. “We are giving significantly more in work letters,” principal Leslie Himmel said. While most of their properties are in various Manhattan markets, they also own in Long Island City. “We have been waiting quite a while for the area to emerge and it’s finally happening,” she said. Overall, she said better buildings will continue to lease well, “But one always has to worry about too much supply coming down.”
Kenneth Fisher, senior partner of the family-run Fisher Bros., recalled that if someone asked his grandfather Larry how the business was doing, he would hold out his right hand and say, “See, it’s not shaking.” When Ken became a broker in 1980, his great uncle Zachary handed him an 8-by-10-inch piece of paper that simply said,
“It’s not beautiful until it’s fully rented.” Today, Fisher said, his hand is not shaking, and their portfolio is 100 percent leased.