Jones Lang LaSalle


Midtown commercial rents surge: report
by Julie Satow
May 16, 2006

Manhattan's commercial real estate market is continuing its upward trajectory, with Midtown seeing the most dramatic tightening.

Manhattan's commercial real estate market is continuing its upward trajectory, with Midtown seeing the most dramatic tightening, according to a recent report.

Rents averaged more than $50 a square foot in Midtown in the first quarter, a 6% hike over the fourth quarter of 2005, according to a quarterly report from commercial real estate services firm Studley. At nearly $63 a square foot, Class A rents rose to their highest level since 2002.

With so little space left in Midtown, "the trend for tenants to take advantage of a 'flight to quality' has abated," said Steve Coutts, a senior vice president at Studley. Instead, tenants are casting a wider net in their search for space.

The Grand Central submarket saw the most leasing activity, with 1.2 million square feet of transactions finalized over the last six months-more than half of all the transactions for Midtown. This reduced availability to 6.1 million square feet -- the lowest level since 2001.
With average rents of $36 a square foot, Downtown is not faring as well as Midtown, but that may change. "Demand for space downtown will progressively increase as Midtown rents continue to spike upward," says Mr. Coutts.

The availability of office space in lower Manhattan is 13%.