06/06/2012

Madison Avenue Offices Available

A joint venture is marketing an office building in Manhattan’s Midtown South submarket, whose prospects are on the upswing.

The 260,000-square-foot property, at the southeast corner of Madison Avenue and East 34th Street, is 93% occupied. Similar buildings have recently traded at per-foot prices of $525-$625. At $600/sf, the property’s value would be $156 million. Studley has the listing.

The owner is a partnership between Rigby Asset Management, which is led by New York investor Peter Armstrong, and Argentinean developer IRSA. The duo bought the building out of bankruptcy in 2010 for $85.1 million. The previous owner, British firm Rock Investments, led by billionaire Paul Kemsley, had paid $107.5 million for it in 2007, near the market peak.

The building, at 183 Madison Avenue, is likely to appeal to core and core-plus investors. The Rigby partnership has signed 34 leases on more than 100,000 sf in the past 18 months. Tenants include financial, technology, manufacturing and retail firms.

“This is an institutional-class asset at a prime location with the demonstrated ability to attract a wide range of tenants,” said Studley executive managing director Woody Heller.

Midtown South, which is separate from the Midtown Manhattan submarket, is benefiting from both leasing momentum and spillover demand from investors priced out of Class-A properties in more-prestigious office corridors. Definitions of the boundaries of Midtown South vary, but they run roughly from 35th Street south to Canal Street. According to CoStar, the submarket encompasses 99.4 million sf of office space, out of Manhattan’s total of 542.5 million sf. The submarket boasted a 94.4% occupancy rate at the end of the first quarter, exceeding Midtown Manhattan’s 92.2% rate.

The average asking rent in Midtown South rose $3.45/sf in the first quarter, to $48.79/sf, according to CBRE. But it still lagged the Midtown Manhattan average of $63.52/sf, which was down $1.09/sf in the quarter.

Midtown South got a big boost in December 2010 when Google acquired the 2.9 million-sf building at 111 Eighth Avenue as its New York headquarters. The move has drawn other creative and technology companies to the area. Google paid $1.8 billion, or $610/sf, for the building, which fills an entire block from West 15th to West 16th Streets, between Eighth and Ninth Avenues.

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