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The power in Manhattan's office market is in Class B buildings this year.
While rents at snazzy Class A skyscrapers have fallen off in some neighborhoods, older, more modest properties are leasing at record prices.
Throughout the city, the average asking rent for Class B buildings has risen 6% since January while the city's Class A rents have been flat, according to RE/Locate, a real estate information tracking service.
Flush with cash from venture funds and initial public offerings, new media firms are mainly responsible for the ever-increasing rates throughout downtown neighborhoods and into Grand Central South. These firms are attracted to Class B buildings, with their wide-open spaces, high ceilings, room to install high-speed wiring, and whiff of Bohemian chic.
"Internet firms are driving the market," says Alex Cohen, the New York City area manager of research services for Cushman & Wakefield Inc.
Except in red-hot Times Square, where asking rents surged for both types of buildings, Class B rents in most neighborhoods have been outpacing Class A rents. For instance, in the Grand Central North-area, Class B rents rose 10% while rents at prime buildings dropped 1%. In Grand Central South, B rents rose 5% while A rents dropped 1%.
Besides Internet firms, small and middle-market professional firms and service businesses looking for expansion space are filling...