Businesses are flocking to the new and growing neighborhoods such as Hudson Yards in Manhattan and leaving the older establishment and residency in Midtown behind.
One of established business, equity firm Kohlberg Kravis Roberts & Company will be moving their corporate headquarters into the newly constructed 30 Hudson Yards. The firm purchased 343,000 square feet, the top ten floor of the 90 story building and will begin operation in 2020.
KKR & Co.’s relocation to Hudson Yards seems to be the beginning of a trend among Midtown businesses. Boies Shiller & Flexner announced it will move its New York City offices to 55 Hudson Yards. Coach Inc., L’Oreal USA, SAP, and VaynerMedia have also announced plans to relocate to Hudson Yards.
Related: Will CNN move to Hudson Yards?
Former landlords are taking notice of the trend.
Midtown Manhattan has long been acknowledged for having the highest office space cost in the New York City, With businesses looking for a change of scenery, tenants are usurping the power of their landlords in the battle over rent prices. SL Green, who owns the majority of the office buildings in Manhattan has lowered rent prices in an attempt to keep tenants from leaving.
According to a report by Savills Studley, rent prices per square foot in Midtown dropped from $91 to $87 from the third to fourth quarters respectively. For the month of February, Midtown tenants paid 7.1% less for rent than they had at the end of last year.
This could have an affect on the New York job market as a whole however. According to Savills Studley’s chief economist Heidi Learner, “We’re now in year seven of a recovery, and we’ve added some 150,000 office workers. It’s been a very robust recovery, but we’re occupying less space. And now we’re pretty certain employment growth is not going to keep to that pace.”
However, not all market researches share this view. Still in the first quarter of the market year, Blake Toline, a CompStak research analyst stated that end of the first quarter “will have to be very strong for the quarter-over-quarter growth rate not to be negative. The pullback in rents is not very surprising, given the overall volatility in the domestic financial markets, as well as questions about China.”