Jones Lang LaSalle
Landlords capitalize on midtown squeeze
Raise asking rents $10 a sq. ft.; others keep spaces empty
By Julie Satow
Published on May 22, 2006
As the frenzy over midtown Manhattan office space intensifies, landlords are tightening the screws.
In the past two weeks alone, numerous property owners have jacked up asking rents by $10 a square foot. Others are refusing tenants' requests for early lease renewals.
"The market is moving so fast that if a week goes by and you aren't paying attention, you miss something," says Peter Turchin, a senior vice president at CB Richard Ellis.
At the end of the first quarter, asking rents in midtown were nearly $50 a square foot, the highest in four years, according to Cushman & Wakefield Inc. Fifteen leases had been signed for more than $100 a square foot, compared with only 10 such deals for all of 2005.
With prices ratcheting up, some owners have stopped publicizing the asking rents for available space. The landlord of 135 W. 50th St., where 150,000 square feet of space is available, removed the asking rent of $56 a square foot from market listings after fielding multiple bids from potential tenants.
In the past month, bidding wars have broken out over the few large blocks of space--100,000 square feet or more--available in the midtown area.
"We are seeing multiple offers for the same blocks of space, and I expect this trend to continue through the remainder of the year," says Mitchell Konsker, an executive vice president at Cushman & Wakefield.
At 1740 Broadway, between West 55th and West 56th streets, Lehman Brothers, CBS Corp. and the Limited Brands are vying for more than 243,000 square feet; the asking rent started out at $50 but has been pushed to $60 by multiple bids, brokers say. In Times Square, ESPN has been battling several law firms over 229 W. 43rd St., where 613,500 square feet is available.
The situation is the same at 1251 Sixth Ave., between West 49th and West 50th streets. Several bidders are pursuing about 200,000 square feet being vacated by law firm Ropes & Gray and the National Hockey League. The front-runner is Dechert, another law firm.
"There is not a lot of current inventory, so if you have a lease coming due and you didn't prepare for it in advance, you have real problems," says Howard Nottingham, an executive managing director at Studley.
The intense demand has allowed landlords to employ aggressive strategies not seen since the city's last economic high point in 2000. Some of them have delayed listing space in the hope of capturing higher rents down the road. The top floor of 9 W. 57th St. is available for occupancy but has yet to be officially put on the market.
Other owners are rebuffing efforts to negotiate early renewals. At 1330 Sixth Ave., between West 53rd and West 54th streets, law firm Covington & Burling's 80,000-square-foot lease is scheduled to end in mid-2007. Efforts to renew the lease failed, and the landlord plans to list the space at an asking rent of $78 a square foot--at least 20% more than it would have received with a renewed lease.
What goes up ...
But not all players are so bullish.
Equity Office Property Trust, which owns 1095 Sixth Ave., is ready to make deals for its 1 million available square feet, even though the space will not be ready for occupancy until mid-2007.
"Our philosophy says it is better to take advantage of a good market now rather than risk uncertainty by waiting to make a lease agreement," says Michael Berman, Equity Office Property's vice president of leasing.
Others believe that the dramatic run-up in pricing could mean that the midtown market is reaching a tipping point. "Smart landlords understand that the law of gravity definitely exists in New York City and that everything is cyclical," says Mark Weiss, an executive vice president at Newmark Knight Frank.
Whatever a landlord's strategy, though, they are undoubtedly in control of this market. "There is virtually no fear on the landlord side of the table right now," Mr. Weiss says.
Comments? JSatow@crain.com
Landlords capitalize on midtown squeeze
Raise asking rents $10 a sq. ft.; others keep spaces empty
By Julie Satow
Published on May 22, 2006
As the frenzy over midtown Manhattan office space intensifies, landlords are tightening the screws.
In the past two weeks alone, numerous property owners have jacked up asking rents by $10 a square foot. Others are refusing tenants' requests for early lease renewals.
"The market is moving so fast that if a week goes by and you aren't paying attention, you miss something," says Peter Turchin, a senior vice president at CB Richard Ellis.
At the end of the first quarter, asking rents in midtown were nearly $50 a square foot, the highest in four years, according to Cushman & Wakefield Inc. Fifteen leases had been signed for more than $100 a square foot, compared with only 10 such deals for all of 2005.
With prices ratcheting up, some owners have stopped publicizing the asking rents for available space. The landlord of 135 W. 50th St., where 150,000 square feet of space is available, removed the asking rent of $56 a square foot from market listings after fielding multiple bids from potential tenants.
In the past month, bidding wars have broken out over the few large blocks of space--100,000 square feet or more--available in the midtown area.
"We are seeing multiple offers for the same blocks of space, and I expect this trend to continue through the remainder of the year," says Mitchell Konsker, an executive vice president at Cushman & Wakefield.
At 1740 Broadway, between West 55th and West 56th streets, Lehman Brothers, CBS Corp. and the Limited Brands are vying for more than 243,000 square feet; the asking rent started out at $50 but has been pushed to $60 by multiple bids, brokers say. In Times Square, ESPN has been battling several law firms over 229 W. 43rd St., where 613,500 square feet is available.
The situation is the same at 1251 Sixth Ave., between West 49th and West 50th streets. Several bidders are pursuing about 200,000 square feet being vacated by law firm Ropes & Gray and the National Hockey League. The front-runner is Dechert, another law firm.
"There is not a lot of current inventory, so if you have a lease coming due and you didn't prepare for it in advance, you have real problems," says Howard Nottingham, an executive managing director at Studley.
The intense demand has allowed landlords to employ aggressive strategies not seen since the city's last economic high point in 2000. Some of them have delayed listing space in the hope of capturing higher rents down the road. The top floor of 9 W. 57th St. is available for occupancy but has yet to be officially put on the market.
Other owners are rebuffing efforts to negotiate early renewals. At 1330 Sixth Ave., between West 53rd and West 54th streets, law firm Covington & Burling's 80,000-square-foot lease is scheduled to end in mid-2007. Efforts to renew the lease failed, and the landlord plans to list the space at an asking rent of $78 a square foot--at least 20% more than it would have received with a renewed lease.
What goes up ...
But not all players are so bullish.
Equity Office Property Trust, which owns 1095 Sixth Ave., is ready to make deals for its 1 million available square feet, even though the space will not be ready for occupancy until mid-2007.
"Our philosophy says it is better to take advantage of a good market now rather than risk uncertainty by waiting to make a lease agreement," says Michael Berman, Equity Office Property's vice president of leasing.
Others believe that the dramatic run-up in pricing could mean that the midtown market is reaching a tipping point. "Smart landlords understand that the law of gravity definitely exists in New York City and that everything is cyclical," says Mark Weiss, an executive vice president at Newmark Knight Frank.
Whatever a landlord's strategy, though, they are undoubtedly in control of this market. "There is virtually no fear on the landlord side of the table right now," Mr. Weiss says.
Comments? JSatow@crain.com
posted by Jones Lang LaSalle NJ News Blog at 2:05 PM
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