Rising demand for space from Internet and media firms helped boost rents at office buildings south of midtown Manhattan by 5.6 percent in the first quarter, according to a report by Cushman & Wakefield Inc.
Rents in Midtown South, the area south of 32nd Street and north of Canal Street, rose to $48.45 a square foot from $45.90 at the end of 2011, Cushman said today in a statement. Asking rents at the highest-quality office properties rose 18 percent to $67.52 a square foot, or about $4.56 less than Midtown’s so- called Class A buildings. Midtown South’s vacancy rate fell to 5.9 percent, the lowest of any U.S. business district.
Rising rents reflect “a whole cultural change” taking place in Midtown South, which includes such trendy neighborhoods as Chelsea and the Meatpacking and Flatiron districts, said Joseph Harbert, Cushman’s New York-area chief operating officer. “Creative” firms are crowding into those areas, while rents in the more traditional office markets in Midtown and lower Manhattan grow more slowly, he said.
“Everyone wants to be in Midtown South,” Harbert said in a telephone interview. “It’s been desirable from a residential standpoint, and retail. And now people want to live close to where things are cool, and then they want to work there too.”
Rents sought by landlords throughout Manhattan rose 3 percent from the fourth quarter to $58.96 a square foot, while the borough’s vacancy rate was unchanged at 9.1 percent. In Midtown, rents gained 2 percent to $66.70 a square foot, and vacancies climbed to 9.9 percent from 9.6 percent. Downtown rents increased 1.2 percent to $40.37 a square foot as the vacancy rate fell to 9.2 percent from 9.5 percent.
The media and technology firms driving rents up in the Midtown South market tend to seek spaces of less than 100,000 square feet (9,000 square meters), Harbert said.
Companies that signed leases in the quarter included Chandler Chicco Agency, a health-care communications firm that took 75,000 square feet at 450 West 15th St. in West Chelsea, near Google Inc.’s building at 111 Eighth Ave. Take-Two Interactive Software Inc., publisher of the “Grand Theft Auto” video games, took 68,000 square feet at 622 Broadway in NoHo, according to Cushman.
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