Manhattan commercial rents increased in the year’s first half even as the space available for leasing grew, according to a semi-annual report from brokerage CB Richard Ellis.
Average asking rents increased to $71.35 per square foot in June, an increase of $0.10 per square foot from May and up from $63.46 per square foot in June, 2007.
Despite an increase in leasing activity in the second quarter, the total for the first half of the year was 10.47 million square feet, a decline of about 1.5 million square feet from the same period in 2007.
Negative absorption continued to rise as well, reaching 4.17 million square feet in the first six months of 2008, compared with a positive absorption of 1.3 million square feet in the same period in 2007.
The availability rate, which tracks both vacancies and space expected to come onto the market over the next 12 months, increased to 9 percent in June, up from 8.1 percent the same month last year.
David Maurer-Hollaender, vice chairman of CBRE, said the office market was seeing the largest gap between direct rents at $72.46 and sublease rents at $65.44 since at least 2000.
But despite the estimate of 20,000 jobs cut from financial firms in Manhattan recently, he said he has not seen an expected 4 million square feet of space (estimating an average of 200 square feet per office employee) appear on the sublease market. Those firms are apparently reluctant to give up office space in Manhattan, returning only 1.4 million feet, he said
“We certainly have not seen this vast flood of sublet space result from the 20,000 jobs lost in New York. That is a vast amount of jobs,” Maurer-Hollaender said.
The tight market also supported prices, he said, adding that only 15 available blocks of space greater than 250,000 square feet were available in Manhattan.
“We really believe we are in a supply constrained environment,” which would support pricing, said CBRE vice president Howard Fiddle. “That said, there are problems … but we don’t think we are in a free fall.”