Park Avenue boom lifts Midtown office market: ‘Never give up on NYC’

Marking a Midtown office-market milestone, State Bank of India leased nearly 42,000 square feet on three floors of 425 Park Ave. — bringing the tower to 100% full.

It’s a triumph for developer L&L Holdings, which with its financial partners Commercial Observer first reported the lease.

More important,  ever since construction started six years ago, the Norman Foster-designed tower was closely watched as a barometer of the high-priced, new-construction market. Rents at 425 Park have topped $200 per square foot.

3

“Park Avenue has been on fire for 24 months,” said CBRE global brokerage chairman Stephen B. Siegel, who wasn’t involved in the Bank of India deal which was negotiated by Cushman & Wakefield.

“Anything available gets leased even though rents are rising,” he said.

But the surge isn’t confined to Park Avenue. Sources told The Post that a pending lease at 590 Madison Ave., which is losing former anchor tenant IBM to SL Green’s One Madison at East 23rd Street, will restore the 57th Street tower to over 90% occupancy.

The building’s owner, an Ohio pension fund, has put it up for sale at $1.1 billion — a test of the investment-sale market which has yet to catch up with the leasing boom. 

Overall Manhattan office leasing went over the moon in January and February, according to new data from CBRE. Some 5.13 million square feet of leases, up 49% over the same period in 2024, marked the strongest start to a year since ancient-seeming 2014.

The momentum shows no sign of slowing. This month, Amazon gobbled up nearly 200,000 square feet at 237 Park Ave.,  its third major expansion in Manhattan since November.

3

While analysts unfamiliar with the extent to which  Manhattan differs from the rest of the country   fret over “work-from-home,” the actual real estate market tells a different story. While some older downtown properties are still in trouble, most premier Midtown buildings — including unprecedented demand and limited supply.  

“The market is back,” Siegel said.

“It validates what I’ve always said — never give up on New York City or on the availability of capital here. It’s  clear to corporations that they’re going to grow. There’s pent-up demand for premium space and there isn’t a lot of new product in the pipeline.”

JLL New York-area president  Peter Riguardi, who wasn’t involved with the 425 Park deal either, took the same view. “At this  point, there is no direct space available in the wave of new construction in New York City. There are a few subleases, but all have more prospects than there is enough space to lease.”

As measured by CBRE,  February’s total  of 2.52 million square feet of lease spaced in Manhattan ran 53% ahead of the five-year monthly average of 1.65 million square feet.

3

Leasing volume in February was up by double-digit percentages over the same month of  2024 in Midtown and Midtown South. Even in the weaker and smaller Downtown market, February leasing was up an eye-popping  287% (due mainly to a half-million square-foot expansion by Jane Street Capital at 250 Vesey St.)

Unsurprisingly, CBRE found the lowest availability rate, 10.4%, in what it called “better buildings” in the Midtown Core, consisting of the Grand Central and Plaza submarkets as well as  Sixth Avenue/Rockefeller   Center, Park Avenue and Fifth/Madison Avenue.

Meanwhile, a different CBRE survey found that Midtown Sixth Avenue/Rock Center leasing has reduced availability to 13.4%.

“The combination of demand and shrinking supply at the most desirable newer buildings benefits the class-A and A-minus buildings all along Sixth Avenue,” Siegel noted.