The overabundance of available space on Third Avenue, which was hanging over the market, has been pruned to the point that building owners are now bumping up rents.
“We’ve seen dramatic moves up and down Third Avenue because there is very limited space,” says Frank Doyle, vice chairman at JLL. “It was a value play. And just because of the tightness in the markets, Third Ave. has become a great destination.”
According to JLL’s research director Tristan Ashby, Third Ave. Class A asking rents “popped” from $60.71 in the second quarter to $64.20 in the third quarter.
Overall asking rents had been in the mid-to-high-$50s per square foot for all of 2013 and 2014, but reached $61.25 in the third quarter of 2015. Overall rents include both Class A and Class B space.
At the same time, overall vacancy dropped from 14.4 percent in the first quarter of 2013 to 11.1 percent by the end of 2014. This year, it has dipped further: from 8.4 percent in the first quarter to 7.8 percent in the second; it’s now 7.1 percent. With Class A vacancy at 6.9 percent, Third Avenue now boasts one of the tightest markets and lowest vacancy rates in the city.
Not all of the run-up in pricing can be attributed to higher asking rents, Ashby cautions.
This is because when cheaper space is leased and taken off the market, the remaining average listed asking rents will appear to rise. But with vacancy plummeting, building owners with the few remaining spaces may also realize the market has now turned in their favor.
“Our theory is that a lot of price-sensitive tenants that would have gone Downtown or Midtown South in a previous life are finding options on Third Avenue,” Ashby says. “It’s not the hippest address, but that’s not what everyone is looking for.
The buildings are good quality and close to Grand Central and the Upper East Side.”
Deals include the Polsinelli law firm, represented by a Cushman & Wakefield team, that leased 40,592 feet at 600 Third Ave. repped a CBRE team.
Shiseido, represented by Savills Studley, also expanded to almost 70,000 feet at 900 Third, which is represented by JLL.
