Midtown offices grow through “space inflation”
Out of a sample of 50 office buildings in Midtown, over half have grown “significantly” over the past 20 years, while just one of them was actually physically expanded.
According to Crain’s, which cites data from a new Commercial Tenant Real Estate Representation report, 34 percent of the buildings expanded by 5 percent or more over the past 10 years. By expansion, the study means new building measurements issued by landlords, such as including hallway and lobby space in rentable square footage, which increases rent collections. The study refers to this as “space inflation,” and if applied to the rest of the Manhattan office market, Crain’s wrote, “that would translate a total annual rent hike for tenants of $775 million.”
As The Real Deal reported two weeks ago, this feature of the market, also called “loss factor,” makes some tenants’ blood boil, leading to a lawsuit from a small tenant in Midtown’s Fisk Building.
“What tenants really focus on is the rent per square foot,” Marisa Manley, president of CTRR, told Crain’s. “Sometimes it is easier to increase the rentable square footage than it is to increase the rent.”
According to the CTRR study, 1140 Sixth Avenue, a 20-story office building located between 44th and 45th streets, grew 41 percent between 1990 and 2011. The only building to physically expand its size was 666 Third Avenue, the Chrysler East Building, where subcontractors were indicted last year for alleged collusion with Lehr Construction. [Crain’s]