The Real Deal New York

Manhattan now “officially” a landlord’s market: DTZ

Demand hits nine-year high; Midtown South continues to thrive

January 07, 2015 08:00AM
By Mark Maurer

dtz-report

From left: Richard Persichetti and charts on 2014 office availability and fourth-quarter office blocks

A continued surge in the technology, advertising and media sector coupled with modest growth in the financial sector saw Manhattan hit big leasing numbers in 2014, with demand the highest it’s been in nine years. 

The inventory squeeze plaguing the Midtown South office leasing market entered a new stage in 2014 as availability reached a nearly 15-year low, according to a fourth-quarter report from DTZ, the global brokerage that closed on its acquisition of Cassidy Turley last week.

Midtown South approached the office vacancy rate of just over 5 percent registered in 1999. Midtown South asking rents have also soared since the 1990s — by $5.25 per square foot to $75.55 in the fourth quarter for Class A office buildings.

“The late ‘90s was the height of the dot-com era and was ahead of its time,” said Richard Persichetti, vice president of research at DTZ.

In Manhattan overall, positive absorption was up by 30.7 percent year-over-year to 9.3 million square feet.

All 17 Manhattan submarkets except three posted positive absorption for the year, Persichetti said. The three that didn’t — Columbus Circle, Times Square and Chelsea — are all located on the west side.

There were 51 leases exceeding 100,000 square feet signed in 2014. The number of leases in that size bracket has hovered around 50 for the past few years, Persichetti said. In Midtown South, only six blocks of 100,000 square feet or more exist.

Amazon’s deal for 470,000 square feet at Vornado Realty Trust’s 7 West 34th Street was the largest one during the fourth quarter.

In Midtown, a brief surge in available sublease space appears to be fading. There was an increase of available sublease space each month from August to November.

“A pattern was emerging in subleasing, but this won’t be a trend for the full year,” Persichetti said. “Sublease space, like at the start of 2013, will be seen as a value option as rents grow for direct space.”

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