The Fashion Center BID is situated within the Penn Plaza/Garment submarket of the Midtown office market. According to the Costar Group, in November 2008, the Penn Plaza/Garment submarket had 687 buildings with a total rentable building area of over 76.2 million square feet of space. Of this total, there was 3.62 million square feet of vacant space, a 4.8% vacancy rate. Asking rents averaged $49.71 per square foot.
The two predominant building types (office and loft structures) in the Fashion Center BID boundary account for approximately 30.8 million square feet of the total 35.4 million square feet, or about 87.2% of the space, with an additional 422,000 square feet of store type commercial buildings. Office structures account for approximately 18.4 million square feet, and loft buildings for approximately 12.4 million square feet of space based on the building classifications as reported by the New York City Assessors Office. These classifications, however, do not reflect usage. There is a good deal of office usage in the larger loft type buildings.
The market in the Fashion Center can be characterized as a relatively tight market, although as the economic downtown takes effect, the availability of space will no doubt increase. The conversion of loft buildings to office space has changed the dynamics of the market, and the overall strength of the economy in recent years has produced a lower vacancy rate in the Fashion Center District. Based on recent industry reports of available space within the BID boundaries, the total space availability in both loft-type and office buildings has declined from about 1.97 million square feet to 1.86 million square feet. The overall vacancy rate (both office and loft buildings) is 6.0%, a small decrease from last year.
In the loft buildings, the amount of vacancies have decline substantially. It is down from 1,395,000 square feet in 2004, to 792,000 square feet in 2005, to 748,000 square feet in 2006, to 520,100 square feet in 2007 and to 416,500 square feet in 2008. This is more a function of space being taken off the market for possible conversions to other uses opposed to a sign of leasing activity.
Office Rental Rates
Office asking rents have remained steady over the past year. Side Street Buildings have an average asking price of $36.31 per square foot, virtually unchanged from last year’s asking rent of $36.36 per square foot in 2007. The Avenue Buildings have an average asking price of $45.31 per square foot, slightly lower than last year’s asking price of $47.53 per square foot. Although asking rents do not necessarily reflect the full status of the marketplace, as a variety of concessions (greater tenant improvement allowance, a period of free rent, etc.) can be part of the overall lease agreement. In recent years, concessions were virtually non-existent; however, as the economic slowdown takes its toll, space availability is expected to increase and the rent concession may appear again.
The table below presents a historical look at the office market represented by the Fashion Center BID and surrounding area which includes several Fifth Avenue buildings that are not in the Fashion Center BID and have Class A space, which skews the total rentable area and the average rents upward.
Fashion Center BID Area and Vicinity Office Market Profile
1st Quarter 2007-Fall 2008
||# OF BUILDINGS||TOTAL RENTABLE BUILDING AREA||TOTAL VACANT SF||TOTAL VACANT %||AVERAGE RENT/SF|
Source: CoStar Group