Availabilities increase in most Midtown districts

Real Estate Weekly, June 21, 1995 by Barry Gosin

Availabilities were up 3 percent, with the Midtown total at 12.6 percent, up from 12.3 percent three months ago. The bulk of this increase came from some 796,000 square feet of additional direct space placed on the market. Sublet availabilities in the overall Midtown market remain virtually unchanged.

Weighted average rental rates improved, however, closing in May at $31.40 per square foot, up 3.1 percent from three months ago. Slowly strengthening rents have been a consistent feature of this market, improving in the year-over-year period though May by soma 9.8 percent on a weighted average basis. By contrast, weighted average sublet rents ended May at $30.98 per square foot, up 10.1 percent from $28.14 per square foot in the same period, and underscoring the quality of select sublet availabilities throughout Midtown. Weighted average rents in Midtown have risen by 3.8 percent since the beginning of the year.

District Analysis

Big declines in sublet availabilities in the Eastside District, removing more than 600,000 square feet from the market in the year-over-year period through May, have lowered the availability rate here to 9.7 percent, from 10.3 percent at the beginning of the year.

Despite the reduced supply of sublet product, total net absorption ended May at a negative 83,275 square feet, in large part due to the addition of 151,306 square feet of direct space. Net absorption in the year-over-year period through May was 933,225 square feet.

Weighted average Eastside rents ended May at $32.56 psf, up 0.2 percent from $32.48 at the beginning of the year.

The Park Avenue District recorded it's first increase in availabilities in over 12 months, with available space up 48.7 percent since February. The district ended May with a 8.7 percent availability rate, it's highest level in over a year. Net absorption ended May at a negative 528,550 square feet for the year thus far, with 147,789 square feet put back on the market in the year-over-year period through May.

Park Avenue weighted rental rates, the highest in the city after Upper Fifth/Madison Avenue, ended May at $42.89 per square foot, up 6.7 percent from just three months ago. Rents have increased 7.4 percent since the beginning of the year.

With Park Avenue no longer the tightest Midtown district, that position has now been assumed by the Westside District, where strong leasing has brought the availability rate down to a healthy 8 percent, or 1.82 million square feet of total inventory. The availability rate was 9.4 percent just three months ago, and 10.5 percent at the beginning of the year.

District-wide net absorption over the past three months totaled 335,998 square feet, with over 500,000 square feet absorbed since the beginning of the year. With year-over-year net absorption through May totaling 1,045,955 square feet, available space has declined by 36.5 percent.

Growing availabilities approaching 400,000 square feet in both the direct and sublet markets forced the Grand Central District availability rate to 17.7 percent in May, up from 16.8 percent just three months ago, and from 16.5 percent at the beginning of the year. The availability rate was 18 percent exactly one year ago.

Net absorption in this district is weak, as expected, with just under 518,074 square feet placed on the market since January. Weighted average rents ended May at $31.04 per square foot, up 3.6 percent from $29.97 per square foot at the beginning of the year.

The addition of almost 865,000 square feet of direct product since January lifted the availability rate in the Sixth Ave./Rockefeller Center corridor to 12.9 percent, from 10.8 percent in January. The rate was 9.8 percent exactly one year ago.

District rental rates are higher, at $39.51 per square foot, up 6.7 percent from $37.04 per square foot at the beginning of the year. Rental rates in this district are 14.8 percent higher than exactly one year ago, when they were $34.41 per square foot.

Upper Fifth/Madison Avenue ended May in somewhat better shape, with year-to-date net absorption of 568,802 square feet. The availability rate stands at 14 percent, or 3.4 million square feet of total inventory. Weighted average rental rates stand at $43.30 per square foot, up 3.3 percent from $41.93 per square foot at the beginning of the year.

The Penn Station/Garment/Convention Center District posted 451,613 square feet of net absorption in the first five months of the year, a 5.5 percent reduction in available space. The availability rate stands at 12.1 percent, down from 12.8 percent at the beginning of the year.

Weighted avenge rental rates stand at $19.67 per square foot, down 3 percent from $20.27 in January. This district, along with the Westside, have sublet prices that exceed prices for direct space.

Downtown Manhattan

This market provides office facilities to the financial services, insurance, and legal industries as well as Federal, State and City Government. It contains 102.8 million square feet of competitive office stock in 173 buildings.