Landlords Downtown have increased their spending on tenant improvements and free rent in recent months, a new Manhattan leasing report covering February from commercial services firm CB Richard Ellis shows.
Landlords are spending on average $66 per square foot on making improvements to tenant space Downtown, and giving an average of 10 months of free rent, the report says.
The free rent levels are the highest of any of the three Manhattan markets since the leasing market began to weaken in mid-2008 and the tenant improvement figure matches the previous high from last year, CBRE data shows.
At the same time, the report shows average asking rents rising Downtown, as well as in Midtown South, but falling in Midtown.
For February, CBRE reported average asking rents Downtown rose by 57 cents per square foot to $38.92 per foot; they rose by 5 cents per foot in Midtown South to $41.71 per foot. But in Midtown, the average asking rent fell by 32 cents to $55.75 per square foot.
A source in the CBRE research department played down the significance of the rise last month in tenant improvement and free rent levels, saying it was mostly driven by one major deal Downtown that was signed in February which had a large free rent and tenant improvement component. The source, who asked not to be identified, would not elaborate on the deal, citing confidentiality agreements.
The statistics for free rent and tenant improvements are based on three months of figures combined, CBRE reports say.
The previous high for free rent was nine months, which was Downtown in October 2009. The $66 per foot figure for tenant improvements Downtown tied the most recent high, which was in July 2009 in Midtown.
Commercial services firm Jones Lang LaSalle said last week in its latest report covering February that the expectation of greater vacancy rates Downtown was pushing prices lower in the market.