A part of Manhattan dominated by technology companies -- Google, Facebook, Twitter -- is now drawing a more traditional New York industry: banking.
Office leasing by financial firms in Midtown South -- the stretch between 30th and Canal streets with one of the lowest office vacancies in the country -- surged in the third quarter to 23.1 percent of all deals from 10.3 percent in the previous three months, according to brokerage Cushman & Wakefield. So far this year, banks and related firms have taken 255,000 square feet (23,700 square meters) in the area, compared with 170,750 square feet in all of 2015.
Financial firms including Silicon Valley Bank are taking space because they want to be close to clients and business partners who already have offices in the area, home to such trendy neighborhoods as Soho, Chelsea and the Flatiron and Meatpacking districts. Between the skyscrapers of Midtown and lower Manhattan, the relatively low-rise neighborhoods of Midtown South, with their pre-war lofts and former factories, warehouses and print shops, have been a magnet for tech and media companies...
Rising demand has pushed Midtown South’s vacancy rate down to 6.5 percent, making it one of the tightest office markets in the U.S. Rents for Class B and C offices -- those that lack the latest in finishes and luxury -- were higher than Class A space in lower Manhattan. Midtown South landlords were seeking $67.90 a square foot for Class B space and $64.41 for Class C, while top-tier space downtown had an average asking rent of $62.44.
Class A space in Midtown South -- there’s only 18 million square feet of it, out of a total market of 68 million square feet, according to Cushman -- was going for $85.06 a square foot, compared with $84.92 in midtown Manhattan to the north.
The leasing surge by financial firms isn’t about to change Midtown South from a hot spot for young coders, engineers and designers to an area dominated by bankers and brokers. And the Plaza District isn’t going to cease being the capital of investment capital.
“What you’re seeing is just a more diversified market,” said Mike Mathias, a leasing broker with Savills Studley Inc. “The future of the world is everything is going to have a tech component. There’s a premium people are willing to pay to be there.”Manhattan’s Tech District Is Attracting Banks Wanting Closer Ties
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National Office Sector Report (Q2 2016)