More reason for Rechler's optimism...
https://commercialobserver.com/2024/10/midtown-manhattan-office-2024-2025/
In Much of Midtown’s Office Market, It’s Like the Pandemic Didn’t Happen
Some of its corridors sport average asking rents of more than $100 a square foot — just like before COVID-19
By David M. Levitt
October 8, 2024
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Midtown Manhattan’s office market is like a Timex watch. It takes a licking and keeps on ticking.
Trends such as a flight to quality among tenants, a dwindling supply of top-shelf office space, and the sheer history of Midtown as the traditional hub of New York business all have combined for a post-pandemic run that other New York submarkets — and cities — could only envy.
.....data shows that asking rents for office space in four districts within Midtown — the Plaza, the Penn Station/Hudson Yards, Fifth Avenue/Madison and the Park Avenue corridor — averaged above $100 a square foot by September. These are easily the costliest office asking rents in New York City — and perhaps the U.S. — and are now similar to the asking rents in these districts pre-pandemic.
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“I think the press is about six to 12 months behind reality,” said Mark Weiss, a Cushman & Wakefield (CWK) executive vice chairman and a four-time winner of the Real Estate Board of New York’s Most Ingenious Deal of the Year Award. “The work-from-home, hybrid trend in New York City is irrelevant, it’s gone. Companies are expanding again and we are seeing [rents] 20 to 25 percent higher in price. Anyone who thinks that workers working from home aren’t looking to be fired is kidding themselves.”
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Some of the biggest recent deals included Blackstone’s renewal and expansion at 345 Park Avenue — which would give the private equity giant 1.06 million square feet there, adding 340,000 square feet to its footprint at its headquarters — and auction house Christie’s 406,700-square-foot renewal at 20 Rockefeller Plaza.
A deeper look at the market shows that there are those pockets where you wouldn’t even know there had been a pandemic-related downturn. Think places such as the Sixth Avenue/Rockefeller Center corridor; lower Park Avenue, roughly from Grand Central Terminal to East 59th Street; and the Hudson Yards area, where all the skyscrapers are brand new or close to it.
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Midtown’s priciest submarket was the Park Avenue corridor, with a weighted average rental rate of $108.84 a square foot, followed by the Penn Station area, which includes Hudson Yards, at $106.24, according to Cushman & Wakefield. The Madison Avenue/Fifth Avenue corridor finished third at $105.77 a square foot.
CBRE pegged the Plaza District’s average asking rent at $125.07 a square foot in the second quarter — the highest in a data set going back to Q1 2018 — followed by the Penn District, including Hudson Yards, at $106.02, and the Park Avenue corridor at $101.55 a square foot.
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One problem that worries brokers is that Midtown is running out of state-of-the-art space, with relatively new towers like One Vanderbilt and buildings in the eastern half of the Hudson Yards filling up. Construction of new Class A product, too, is slackening, with little to no new product coming.
“We 100 percent need to build new product,” Myers said. “It used to be real estate was always location, location, location. Now it’s about quality, quality, quality.”
With skyscrapers that came online in the 2010s now filled up, “we’re delivering nothing in `25, nothing in `26, nothing in `27 unless someone starts today,” Myers said.
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There are, in fact, six office projects currently under construction in Manhattan. The biggest, at 1.9 million square feet, is 270 Park Avenue, J.P. Morgan Chase’s future headquarters. Two others, 1 St. Marks Place and 1 High Line, are primarily residential projects with office footprints of fewer than 50,000 square feet each.
There are another 35 office projects planned or proposed throughout Manhattan comprising some 31 million square feet, 27 of which are in Midtown. Those include 350 Park Avenue (the skyscraper with 1.8 million square feet that Ken Griffin’s Citadel investment house will anchor). The number also includes two planned towers over the Port Authority Bus Terminal, at 3 million and 2 million square feet.
Another, the redevelopment of the Grand Hyatt hotel site, which is on CBRE’s list, is being co-developed by RXR and TF Cornerstone. Plans call for 200 hotel rooms and 2.5 million square feet of offices, an RXR spokesman said. It is the site immediately east of Grand Central. The One Vanderbilt tower is immediately west of the terminal. The Grand Hyatt project, which is sometimes called Project Commodore, is sandwiched between the terminal and the Chrysler Building.
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NEW YORK is Back!
“Office buildings are our factories – whether for tech, creative or traditional industries we must continue to grow our modern factories to create new jobs,” said United States Senator Chuck Schumer.
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