A new report shows Midtown South — home to Silicon Alley's start-up scene — is the hottest commercial real estate market in the city.
The vacancy rate in the area stands at 6.1 percent — significantly lower than the 9.8 percent rate in midtown Manhattan and the 9 percent Manhattan average, according to commercial real estate broker Cushman and Wakefield.
The Midtown South area includes the neighborhoods of SoHo, Greenwich Village, Madison and Union Squares, Hudson Square, NoHo, Chelsea and the West Village.
Information, technology and media companies made up about a third of all new commercial leases in the area in the last year.
"Google started this with what I call the Google effect," explained Andy Peretz, an executive vice president at Cushman and Wakefield. "Which is taking almost 1 million square feet for yourself in a 3 million square foot building. Then everybody else wants to be around you."
Google purchased an 18-story building in Chelsea in December 2010.
Education and apparel companies have also moved into the area. NYU and JCPenney both signed lease deals in Midtown South in the second quarter. NYU is currently in the process of trying to get approval to expand its campus in the Greenwich Village neighborhood.