Tech prices continue to rise in Manhattan.
Hiten Samtani If further proof was needed that Manhattan is becoming a technology-company haven, look to leasing activity in January. Several tech powerhouses, including Twitter and IBM, signed major deals last month, and sources said that more big names will soon follow.
Most of the tech action was focused in Midtown South. But Midtown and Downtown also saw healthy leasing activity.
Richard Bernstein, a vice-president at commercial firm Cassidy Turley, said more high-profile deals and continued absorption are on the way. Prices, he said, are “going only one way, and that’s up.”
The average asking rent overall in Manhattan was $60.57 per square foot in January, an increase of $0.16 from $60.41 in December, according to data from commercial brokerage Colliers International. That’s the fifth straight monthly increase, with Midtown leading the gains. The availability rate, an indicator of space currently vacant or available within the next 12 months, dropped by 0.2 points to 11.1 percent in January, from 11.3 percent in December.
Vornado Realty Trust and SL Green Realty signed two hedge funds to their jointly owned office building at 280 Park Avenue. Napier Park Global Capital took 25,000 square feet on the third floor of the 1.2-million-square-foot tower, while Mount Kellett Capital Management will set up on the fourth floor in a deal for up to 35,000 square feet.
Napier was represented by Newmark’s Daniel Madison and will pay rents starting in the low-$80s per square foot. Mount Kellett was represented by Newmark’s Neil Goldmacher and will pay rents starting in the mid-$80s. The landlords were represented by a CBRE team led by Mary Ann Tighe and Peter Turchin.
Just to the south, Aby Rosen’s RFR Realty inked tax and advisory firm Grant Thornton to 130,357 square feet at 757 Third Avenue. Jones Lang LaSalle’s Mitchell Konsker and Alexander Chudnoff led a team representing RFR, the New York Post said. DTZ Americas’ Mike Christian, Gregg Espach and Chris Helgesen repped the tenant.
“Certain kinds of buildings will see healthy price increases in Midtown,” said Bernstein, adding there are a number of large leasing deals in the immediate pipeline.
The average asking rent in Midtown rose to $70.21 per square foot in January, up $0.48 from $69.73 in December, according to Colliers. The availability rate increased by 0.4 percentage points to 11.7 percent from 11.3 percent.
Midtown South had an exuberant start to the year, with some of the world’s top tech companies signing leases. Twitter committed to more than 140,000 square feet at Savanna’s 245-249 West 17th Street, located between Seventh and Eighth avenues. The social networking company will pay rents starting in the low-$70s per square foot in a 10-year deal, according to CompStak. Twitter was expected to move to Edward Minskoff’s 51 Astor Place, but got edged out by IBM, which will take about 120,000 square feet at that building. IBM’s descent upon 51 Astor created a domino effect that hasn’t been seen in the market in a long time, said Bernstein, explaining that the building’s competitors would now become viable tenant destinations.
Other notable deals in Midtown South included Spotify, which signed a 52,000-square-foot expansion at RXR Realty’s 620 Avenue of the Americas, and will reportedly pay rents in the low-$60s per square foot; Mashable, which took 38,580 square feet at L&L’s 114 Fifth Avenue for rents in the mid-$70s per square foot, and Google, which added 17,658 square feet to its space at Jamestown Properties’ Chelsea Market for rents in the mid-$60s per square foot.
The average asking rent in Midtown South fell $0.47 to $54.71 per square foot in January, from December, Colliers data show. The availability rate in January was 8.6 percent, a drop of 0.5 percentage points from December.
Brookfield Office Properties made some headway at Brookfield Place by signing standardized test creator College Board to 145,000 square feet at the 250 Vesey Street building. College Board will pay rent in the mid-$50s per square foot in the 20-year deal, CompStak data show. Brookfield is still trying to lease about 574,000 square feet at the property, according to Bloomberg News, and recently said that it would use the building’s swank retail space to attract office tenants. High-end retailers such as Burberry, Salvatore Ferragamo and Hermès are coming to the complex.
Cassidy Turley’s Bernstein said retail often helps change the complexion of an office property. “These high-end boutiques can cast a different profile to those buildings,” he said.
Also in the neighborhood, insurance firm Allied World Assurance expanded to 143,297 square feet at Jack Resnick & Sons’ 199 Water Street, continuing a purple patch for leasing at the building that was ravaged by Hurricane Sandy in 2012.
Newmark’s Paul Ippolito and Joseph Zona represented Allied World in the 16-year deal, while Cushman & Wakefield’s John Cefaly and Robert Constable worked alongside Resnick’s in-house brokers Brett Greenberg and Dennis Brady to represent the landlord.
The neighborhood had a number of in-pipeline deals that should be signed by the end of March and would include “industries that have never located Downtown before,” said CBRE’s Bruce Surry.
The average asking rent Downtown was $48.22 per square foot in January, down $0.38 from December, according to Colliers. The availability rate was 13.6 percent, a drop of 0.7 points from December.
Investors are also showing interest in converting office buildings such as 180 Water Street, 140 West Street and 49-51 Chambers Street into residential units, which would tighten office supply in the area.