The Manhattan office market began to turn around from a “rocky” first quarter, with more than 708,000 square feet of space absorbed in the second quarter and availability dropping to 9.6 percent, according to commercial brokerage DTZ.
The market for Class A office space performed particularly well, as almost 1.1 million square feet of positive absorption in the second quarter “recovered all the space brought to market” at the beginning of the year and took the year-to-date total to a positive 368,000 square feet.
Manhattan leasing activity continued to underperform on a year-over-year basis, however – reaching 13 million by the middle of the year, compared to 19.2 million square feet at the same point last year.
The number of transactions over 100,000 square feet were also down to 25 at the end of the second quarter, compared to 32 at the same point in 2014.
“Following a subpar first quarter, the Manhattan office market rebounded in the second quarter with strong market fundamentals led by demand outpacing space returns,” Richard Persichetti, DTZ vice president of research, marketing and consulting, said in a statement.
“Tepid” leasing activity, coupled with additional supply, kept Manhattan asking rents relatively flat through the first six months of the year, according to the report.
Asking rents jumped $0.36 per square foot, to $70.09, with Class A asking rents increasing $0.64 per square foot to $77.15 and Class B asks rising $0.66 per square foot to $60.64.
The Midtown market picked up in the second quarter, with availability dropping to 9.6 percent – below 10 percent for the fourth consecutive quarter” and seeing slight jumps in both Class A and Class B asking rents.
The Class A market in Midtown also saw six leases greater than 100,000 square feet in the second quarter, bringing the year-to-date total to 13.
Midtown South was the only office market to post an increase in availability, to 6.9 percent. The submarket added five buildings with at least 50,000 square feet in the second quarter, which created “additional opportunities for tenants with larger space requirements,” the report showed.
That lack of supply saw Class A asking rents in Midtown South drop $3.33 per square foot, according to DTZ, as the market had “less than 500,000 square feet of direct space” available.
The Downtown market, meanwhile, posted more than 441,000 square feet of positive absorption in the quarter, with availability dropping to 12.1 percent.
News Corp. and 20th Century Fox’s pending move to 2 World Trade Center “could be the catalyst that Downtown needs to ignite leasing activity,” DTZ added, citing only one transaction for more than 100,000 square feet in the submarket so far this year.