Something very interesting is occurring in the Manhattan commercial office space market: until recently, rents in class A office buildings all over the city commanded a big premium over rents in class B and C loft buildings in Midtown South. Conventional office buildings, often landmark like The Graybar Building, One Grand Central Place or 370 Lexington Avenue would cost business tenants up to 40% more to lease than side street loft buildings in neighborhoods such as Madison Square, the Flatiron District and Chelsea.
Chelsea, Flatiron District No Longer Inexpensive
But this situation has changed dramatically. Today, you may pay just as much to lease offices in a former industrial building in The Flatiron District as for an office rental in a landmark, Grand Central Class A property with such amenities such as 24/7 attended lobbies, visitor center sign in, modern mechanical systems, central HVAC, on-site property management and cleaning services.
Why? Because tastes and priorities have changed: everyone today wants to lease an industrial chic loft space for their business. The open plan environments with 11′ ceilings, concrete or wood floors, large windows and brick walls typical of the former industrial buildings of Midtown South is what expanding industries like media, advertising and technology are seeking and willing to pay for.
These industries, which greatly value a collaborative work environment, appreciate these large open areas that can fit a larger number of cubicles. Plus, the light, airy feel of these spaces makes them feel hip and modern.
Demand for office rentals in former industrial buildings in Midtown South has grown so strong that asking rents in neighborhoods like the Flatiron District, Madison Square and Chelsea are $65 per S.F. today versus $30 five years ago.
So if these neighborhoods are no longer cheap, what does this mean for you?
Rents in Midtown Class A Offices Now a Bargain Compared to Class B, C Midtown South
It means that when you are considering relocating your business or seeking office space for expansion, you can find excellent value in Midtown Manhattan Class A buildings. As long as you are comfortable with conventional office space, there is great value in this part of New York City.
Keep in mind that, under current market conditions, you can lease offices on a Class A building for less than what you would pay for a Class B or C in Midtown South! And landmark buildings such as the One Grand Central Place, The Graybar, and 370 Lexington Avenue are now actually more affordable than many loft buildings in Midtown South.