Harry Macklowe took another step toward building a supertall office tower across from St. Patrick’s Cathedral and between East 51st and 52nd streets. He quietly closed this week on a $44 million purchase of four-story 5 E. 51st St., according to city Finance Department records.
But ecstatically remarried Macklowe still has a long way to go with the multibillion-dollar project. His assemblage isn’t complete yet; air rights purchases must be negotiated; and the 1,551-foot-tall skyscraper would need several, which would face certain contested city approvals, including from the Landmarks Preservation Commission (because it brushes shoulders with several designated landmarks).
When office space available for sublease grows, it’s usually a sign of a weakening submarket. Yet the opposite appears to be the case in Midtown South, according to a new report from CBRE.
Midtown South sublease space has grown to 2.3 million square feet, representing 30 percent of the whole available market. Yet CBRE research wizards Nicole LaRusso and Michael Slattery say that ongoing sublease additions in the area are “mostly the result of tenants leaving behind spaces they’ve outgrown as they move to larger spaces to accommodate more employees.”
They note, “The appeal of sublease space has not diminished in the face of immense expansion of coworking and other flexible space providers such as WeWork and Knotel.”
Adidas, for example, grew and renewed in 2018 and is now disposing of a smaller sublet space. Companies such as Teacher Synergy and MediaOcean are among tenants in the neighborhood that have either expanded or are looking for more space.
Sublease asking rents in Midtown South rose 20 percent from $62 per square foot one year ago to $74.64 psf. The sublease discount over direct rent is just 13 percent, compared with 40 percent in Midtown and 20 percent Downtown, according to CBRE.
