Hunting for office bargains
September, 01, 2007
A commuter crossroads is blossoming as a commercial center, but many people move through the Grand Central Station area too quickly to notice.
Asking commercial rents have been quietly climbing in the Grand Central area as demand for space there grows.
But unlike in the Plaza District, for example, where the average asking rent for Class A buildings increased $2.33 between June and July to $107.25, Grand Central's rent crept up a mere 28 cents a square foot, to $80.06, over that period, according to data from Colliers ABR.
"There are deals to be had, at least by Midtown standards," said Robert Sammons, director of research at Colliers ABR. "Not every tenant is going to go out and pay $100 a square foot. The Penn Station-Garment District has always been the bargain for Midtown, and some cheaper rents can also be found in the area of Grand Central Terminal."
Grand Central's bargains aren't new, but those deals could seem even better, and companies may start to seriously consider taking a lease along the East 42nd Street corridor.
Grand Central Class A rents in July averaged $27 a square foot less than in the Plaza District.
"Part of it has to do with the fact that a lot of the high-end space has been leased there," Sammons said. "Otherwise there's no particular reason why rents would be so dramatically lower in the Grand Central area than the other Midtown submarkets, besides Penn-Garment."
Even Times Square, "which was always the stepchild" of the market, at least until new office buildings sprang up there in recent years, saw rents averaging $94.62 a foot in July, Sammons said.
The Penn Station-Garment District submarket offers the biggest bargains in Midtown, although part of the reason for the cheaper rents could be that, according to Sammons, there are only eight Class A buildings there.
At the end of July, rents in the Penn Station-Garment District were $51.85, data from Colliers ABR indicates. Even there, rents are going up. There was only a nominal uptick in rent of 38 cents a square foot from June to July, but the change from the end of May to July was $3.41 a square foot.
Jeffrey Rosenblatt, an executive managing director at Grubb & Ellis New York who specializes in office leasing, negotiated a couple of leases in the Penn Station neighborhood in the first quarter of the year, in the range of $29 to $31 a square foot.
The landlords "can afford to make deals below market because a lot of them have no mortgage and they've owned the buildings forever," Rosenblatt said. "They want to keep their cash flow. They want to keep their space leased."
Also in Midtown, rents ticked up in the Rockefeller Center submarket, in large part due to June rent increases by Tishman Speyer Properties, the primary building owner in the area.
The average rent in upper-tier buildings in the Rockefeller Center area increased 17.7 percent from May to July, to $98.80 a square foot.
Go to chart: Average Class A asking rents in July