Midtown South shows signs of a rebound

Real Estate Weekly, April 20, 1994 by James S. Gladstone

Commercial leasing activity is on the upswing in Manhattan's Midtown South, the heart of which runs from 23rd to 34th Street between Fifth and Lexington Avenues.

The heavily commercial area, which borders the Murray Hill, Gramercy, and Chelsea neighborhoods, is showing signs of rebounding. Large concessions are less common, and rents have stabilized. Although the market has yet to see any significant increases, rents have stopped plummeting as they had been during the early 1990s.

Midtown South consists of a pot-pourri of companies. However, due to the area's abundance of Class B buildings, the bulk of the activity tends to be smaller users, many of them start-ups, that require 1,500 to 5,000 square feet of space. In fact, spaces over 12,000 square feet are not in great demand in Midtown South.

There have been again some instances of companies relocating to the area from Midtown. One well-known organization, the Clio awards for advertising, recently headed south from Madison Avenue and 48th Street, to 276 Fifth Avenue at 30th Street.

While the price gap between the two areas is not as large as it was in the early 1980s when the Midtown market was booming, there is still a difference of approximately six dollars per square foot. In Midtown, Class B space runs in the mid- to low-twenties per square foot. The Midtown South market appears in the $15 to $19 range.

But while price is somewhat of a factor for companies setting up shop in Midtown South, many are also attracted by its quieter and less crowded atmosphere, as opposed to that of busy Midtown. Over the past few years, many notable restaurants have opened in the neighborhood, which a number of Midtown South tenants describe as "more interesting" and "cozy" than those in Midtown.

Midtown South's central location is also an attraction. Penn Station and other major transportation arteries, including the Lexington Avenue, Sixth Avenue, and Broadway BMT subway lines, as well as the PATH trains, are within walking distance in most cases.

The going rents and terms being offered are summed up in the following sampling of leases that have recently been negotiated in Midtown South:

* 2,650 square feet at 419 Park Avenue South, for Momentum Partners Inc., a start-up firm that handles exclusive licensing for children's products. The terms of the lease are for five years, at an aggregate rental of $200,000.

* 3,000 square feet at 276 Fifth Avenue, for Uniglobal Pension Planners, Inc. The aggregate rental for this 10-year lease is in excess of $525,000.

* A ground floor store at 186 Fifth Avenue, for Rymko International Enterprises Inc., a retailer of jewelry and watches. The terms of the lease are for eight years, at an aggregate rental of $300,000.

Small businesses, like those mentioned above, represent a hot growth area in today's economy. Since Midtown South has the means to respond to their increasing demand for reasonably priced office space, leasing activity is likely to escalate even further.