MANHATTAN office rents in all property classes have moved up so sharply in the last few months that they have reached record highs in most areas including Midtown, where average rents for Class A buildings have hit $70.77 a foot, according to a new commercial real estate study.
The average rent for all New York City buildings reached its highest level ever at $53.43 per foot, real estate adviser Cushman & Wakefield said.
The sublease vacancy rate of 1.1 percent means there are almost no lower-priced rents available.
The overall 4.5 percent vacancy rate has created an owner’s market with rents at top tier – often called Class A – buildings coming in at $100 a foot, while other buildings have seen their rents per foot jump anywhere from $15 to $20 over previous rates.
“There is a shortage of space and pricing issues,” said Joseph Harbert, local chief operating officer of Cushman & Wakefield.
That has sent smaller tenants scurrying downtown, where rental activity has increased 51.5 percent in Class B buildings and an astounding 250 percent in Class C properties.
Meanwhile, residential conversions are grinding to a halt.
Downtown vacancy rates responded by dropping to 7.2 percent, the first time in a decade the rate there has dipped below 10 percent. At the same time, Class A rents downtown have jumped 20 percent from a year ago to $47.41 a foot, though that is still half what is being asked in the best Midtown buildings.
Despite the spiking rents, New York recently fell to the No. 9 most expensive city in the world for office rents from No. 7, helping international companies to perceive that New York’s rents are a bargain. London tops the list, which now includes Mumbai at No. 5 and Dubai at No. 10.
Rising rents have also helped fuel investment sales, already at an all-time high. While 2006 broke records at $34.7 billion in sales closed, more than $13.6 billion in deals have already closed in the first quarter and $11.9 billion is under contract, setting the stage for another record-setting year.
“They are counting on the rollover of leases and huge increases in income,” said Jon Caplan, an investment sales broker with Cushman & Wakefield.
*
The law firm of Cleary Gottlieb Steen & Hamilton is hot on 7 World Trade Center.
The industry is buzzing about a possible deal for around 450,000 feet that would effectively fill up the 52-story, Silverstein Properties-owned tower.
Cleary Gottlieb currently has roughly the same amount of space across from Ground Zero at the 2.1 million-foot One Liberty Plaza, as well as two smaller outposts in Midtown of around 10,000 feet each. The lease at One Liberty Plaza is up in 2010.
Barry Gosin and Moshe Sukenik of Newmark Knight Frank are representing the law firm, while CB Richard Ellis handles the agency for Silverstein Properties.
They all declined comment.
Cleary Gottlieb is said to also be looking at other buildings.
Yesterday, Silverstein announced that Moody’s Corp. has agreed to occupy two additional floors at the tower totaling 80,000 feet, making its total commitment 670,000 feet.
Meanwhile, DRW Commodities has signed on for 8,568 feet on the tower’s 34th floor.
*
Ethan Allen is plopping itself into a flagship in Bloomie’s country, right next to the department store. It will occupy three floors totaling 37,000 feet in the retail condominium space at 1010 Third Avenue under the residential tower. The stores now there have leases that soon expire.
Fred C. Posniak of W&M Properties, which manages the property for a limited partnership led by Peter and Anthony Malkin, chairman and president of W&M Properties, respectively, negotiated for the owners, while Joanne Podell of Cushman & Wakefield brought in the Danbury, Conn.-based furniture giant.
*
A rare jewel at 2 W. 47th St. in the Diamond District traded to ABS Partners for about $45 million. According to partner Earle S. Altman, the building will steam clean the exterior while lobbies and elevators will be upgraded.
“We’re also redoing the Jewelry Exchange on the first floor and talking to people about taking over and operating it,” he said.
The building comes with close to 50,000 feet of air rights for literally, some future upside.
*
A key site on the northwest corner of 240 West Broadway and N. Moore Street – the N stands for Nathaniel, not North – traded for $12.5 million.
Though the site, which is currently a parking lot, can be built to a maximum of 20,060 square feet, it will eventually become eight stories of full-floor, high-end residential condos that will be, coincidentally, developed by TriBeCa converter, Peter Moore.
Charles Kingsley, Yoav Olesner, Jon Epstein and Glenn Tolchin of Cushman & Wakefield handled the investment sale for the long-time family ownership.
Given rising construction costs and the price of the land at $625 a foot, the condos will need to fetch over $2,000 a foot, the brokers said.
