Pockets of value in Midtown

May 2024

Closing Time

In the Midtown office market, there's been a notable increase in building trades as of late due to lender exhaustion, failed business plans and a myriad of other reasons. While serving as a boost of market liquidity, this also sheds light on the net asset value of these buildings, which has led to competitive pricing for vacant spaces and subsequent absorption.

Taking one of the worst hit areas (and most pilloried by pundits as "outdated," "obsolete,” and “worthless”), we’ve seen a surprising amount of activity in the Garment District/Penn Plaza market, with appropriately priced spaces getting leased. While loyal to the area, our clients have identified compelling alternatives that they’ve leveraged for better deals, whether it be to renew or relocate.

For reference, buildings located between 5th and 6th Avenues are offering rents starting in the $35-40 per square foot range for spaces with brand new installations, while those west of 7th Avenue are offering newly built spaces with rents in the $30-35 PSF range. Comparatively, as-is installations or renewals are landing with rents with an additional 20-30% discount.

Recent deals include a full floor on West 37th Street (between 5th and 6th avenues) leasing at $29 PSF, with 3 months free and some landlord work included for a lease < 5-years. Another example is a property on West 35th Street (between 7th and 8th avenues) leasing at $32 PSF, with 4 months free and a brand new buildout, also for a term less than 5-years.

Four years after the most acute shock to New York City office space and despite the political headwinds and doubt of NYC’s vitality, we continue to see a brisk pace of leasing activity from our perch on the tenant side.

Our clients are motivated to seize opportunities that optimize their office footprint, whether in quality or cost, and within buildings that are well-run, well-capitalized, and maintain great ownership. Ultimately, the activity we support reinforces our unshakable confidence in Midtown’s resilience and ability to continually adapt to changing dynamics.

Until next month,

Ben