The former stomping ground of some of the world’s most powerful financial giants is seeing a severe fall from opulence. Gone are the days when the commercial stretch of Park Avenue is known for astronomical asking rents in its premier buildings which were home to the likes of JPMorgan, Lehman Brothers, and UBS, leaving the area almost unrecognizable.
For decades the commercial stretch of Park Avenue was like a bubble of wealth, giant corporations, and even bigger bonuses for the people who were running those corporations. But we all know what happened to them…but what has become of the space where these financial giants used to frolic? According to some reports, it is merely an “empty shell of its former self.”
This area of Midtown has reportedly seen a bigger rent drop than any other submarket. Running from Grand Central to 59th Street, the Park Avenue submarket has “fallen harder and faster than any other Manhattan submarket over the past 12 months.” In fact, according to one source, from October 2008 to October 2009, average rents dropped an astounding 34.7 percent, from $108.57 per square foot to just $70.85 per square foot. For comparison’s sake, the overall asking rents in Manhattan fell 22 percent during the same period, a 12.7 percent difference.
This incredible drop in rent asking prices is all the more shocking due to what the prices used to be in the area. At the height of the market, rent asking prices swelled to approximately $175 per square foot for a unit located in some of the area’s trophy buildings. One man who oversees leasing at 450 Park Avenue said, “Rents were so high in ’07 and ’08—at an all-time high—so when there was a correction, [they] had a lot more room to drop when the economic crisis hit.”
According to one source, there is currently an astonishing amount of currently vacant sublease space on Park Avenue, specifically in the 277, 299,320, 345, 250, and 299 Park. The combined square footage of vacant space is somewhere in the ballpark of 776,000 square feet, and the amount of defined space that is gearing up to hit the market is just over 1.5 million square feet.
To compensate, brokers and landlords have had to make some major adjustments. Instead of only seeking tenants who are willing to enter into leases of seven to 10 years, some are settling for leases of just three years to try and ride out the storm.