Hedge Fund Real Estate Update: Is Midtown Still the NYC Hot Spot?
In the land of U.S. commercial real estate for financial services companies, Midtown Manhattan has always been the spot. But as the market has evolved, so too have the needs of hedge funds and investment firms – even when it comes to their office space.
Midtown Manhattan has long held the title of most expensive neighborhood for office rents, and this trend continues into 2012. According to a Q2 2012 report published by Newmark Grubb Knight Frank, the average asking price for office rentals in Midtown is $63.54 per square foot, which is significantly higher than the overall Manhattan average of $51.93.
The rising popularity of areas such as Midtown South (generally found between 30th and Canal Streets) has left the traditional Midtown area with more vacancies than in typical years. Companies, including financial services firms, are often opting for trendier neighborhoods within the city, including Chelsea and SoHo, as well as Midtown South. The latter of these areas is averaging just $40.21 per square foot, nearly on par with costs in downtown Manhattan ($40.20) and significantly less than the prestigious Midtown section.
Companies particularly interested in the Midtown South area are technology and media firms, which has earned the area the nickname “Silicon Alley.” And these technology companies are popping up everywhere around the city. According to brokerage firm Cushman & Wakefield, “technology, media and information firms that gravitate to the area took more Manhattan office space than financial companies this year for the first time.”
One explanation for this trend may be that financial services firms are trying to operate more efficiently with less real estate. While employment has risen in the investment industry (including 25,000 jobs since 2010), office vacancies have stayed stagnant, indicating firms are doing more with less.
And yet there are other firms in New York who don’t rely on commercial real estate at all. Some funds prefer a managed office space through which they can leverage office and business support and technology services. Eze Castle Integration’s hedge fund hotel in Midtown remains a hot spot for hedge funds and investment firms looking to leverage the prestigious Midtown address and the benefits of a managed service, including administrative and office personnel and support, telecommunications and the proximity of a first-class team of certified engineers. To learn more about Eze Castle’s hedge fund hotel or to schedule a tour, please contact us.
Be sure to come back next week when we take a look at the office real estate market in Europe’s most expensive city: London!
Sources: Crain’s New York, Newmark Grubb Knight Frank, and Bloomberg