A tale of two Park Avenues

Welcome to Crain's New York Top Stories. This week, senior reporter Aaron Elstein investigates why fortunes have diverged for landlords along the storied thoroughfare.

For office owners north of Grand Central Terminal on Park Avenue, it feels like the best of times.

The bankers who occupy many of the buildings there have returned to work, an act of solidarity with landlords to whom they’ve written billions of dollars’ worth of mortgages. JPMorgan is building its 70-story headquarters, and demand for premium office space on the avenue is so strong that developers are daring to dream of building more.

But south of Grand Central, it’s the worst of times. A shortage of casually dressed office workers — who tend to work in fields such as tech and media — is causing headaches for landlords including Charles Cohen, who owns two big office buildings south of Grand Central and defaulted in February on more than half a billion dollars’ worth of personally guaranteed loans.

“North of the station, people wear suits to work, and south, it’s jeans and T-shirts,” observed Gabe Marans, vice chairman at the real estate brokerage Savills. “The jeans and T-shirt wearers haven’t come back as much.”

The widening gap between Park Avenue’s north and south sides can’t be explained entirely by location; both are convenient for commuters. But buildings to the north are newer and taller and offer amenities that enable tenants to eat or sleep at work so they aren’t affected by the scarcity of shops on the avenue below. From East 40th to East 59th streets, asking rents on Park are the city’s highest at $110 per square foot, according to Savills. The availability rate is half Midtown’s 17% average.

Southern Park Avenue, however, is more like the rest of Midtown and is part of a market with a 20% availability rate, according to Colliers. The data suggest its attractive but mostly older buildings don’t hold as much appeal to tenants when there is lots of newer space on the market. Office rents in the area average $82 a square foot.

“This is a period of adjustment, and there are landlords in the midst of trying to make it work,” said James Mettham, president of the Flatiron NoMad Partnership, a business improvement district that includes Park Avenue South.

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