By Peter Shakalis

In the Midtown North market, the increase in rents was particularly intense in the Plaza district which is generally located from 50th to 57th street between Fifth and Park Avenues. For Class A properties, the average asking rent increased at a 27.3 percent annual rate in the first quarter from the fourth quarter 2010 level. The average asking rent for direct space (space offered directly from the landlord) in the Plaza district finished the first quarter just below $75 per sf. Moreover, it is now possible to point to numerous transactions being completed at over $100 per sf.

In the Grand Central and Times Square Districts, asking rents have held firm, but the availability of both large and moderately sized blocks of space has kept rent levels from escalating dramatically. Average rents in these markets were $54.25 per sf and $59.10 per sf respectively during the first quarter 2011.

Rents moved up at a 15.0 percent annual rate in the Midtown South market. The increase was especially pronounced in Class A properties where rents increased at a 21.3 percent annual rate. The drop in the availability of Class A space in the Midtown South market was especially dramatic. Rents in this market on average ranged from the low to mid $40s per sf.

Finally, after multiple quarters of declines in the average asking rent in the Downtown market, an increase was recorded in the first quarter of 2011. As more Class A sublease space is put on the market, the overall average rent in the Downtown market is brought up. Additionally, asking rents on direct space in Class A and B buildings have stopped declining and actually increased slightly in the first quarter. Although this is a good sign for the downtown market, the fact that the large financial institutions have not yet added substantially to their respective employment levels means that the recovery in the Downtown market will take some time. Downtown rents averaged in the hi $30s per sf.

With the wide divergence in average asking rents between modern Midtown North and Downtown Class A properties, interest in the Downtown market is beginning to grow as exhibited by the recent renewal of Deliotte & Touche at the World Financial Center and interest in the World Trade Center buildings from tenants such as Conde Nast Publications which is presently located in Times Square.

We are in the midst of an amazingly rapid rent cycle; and the question is whether the economic and business fundamentals will be strong enough to justify this rebound in rents.

Peter Shakalis is a Director at Colliers International NY LLC