The Real Deal New York

CBRE reports strong Downtown leasing in turbulent market

July 11, 2011 01:44PM
By Adam Pincus

Leasing executives from the commercial services firm CB Richard Ellis championed some of the strongest statistical numbers seen in more than a decade for the Downtown district during a media briefing this morning, just weeks after Bank of America announced it would give up nearly 3 million square feet in Lower Manhattan, increasing competition for the area’s landlords. 

The net absorption — which measures the change in the square feet of space occupied during a particular period — for the Downtown market in June was 1.23 million square feet, the statistics show. That’s far ahead of numbers seen, not only in recent months, but in recent years.

“Absorption is positive,” Sheldon Cohen, senior managing director at CBRE, said. “You have to go to 1998 to get absorption at that [monthly] level.”

The second-quarter media briefing was held in the 10th-floor marketing center at Larry Silverstein’s 7 World Trade Center, overlooking the World Trade Center construction site.

Yet those bullish absorption numbers contrasted with the 2.9 million square feet occupied by financial services firm Bank of America that Brookfield Office Properties is putting on the market in late 2013. 

And adding to the complexity is that neither the BofA space nor the historic 1 million-square-foot lease Conde Nast signed in early June at 1 World Trade Center, will impact the absorption, because neither of those spaces will be available within 12 months, the cut off for the CBRE research.

Overall, the market remained healthy, June statistics show, even as tenants worried about the broader economy, Matt Van Buren, CBRE executive managing director, said.

“My subjective view is, talking to brokers across the [company], there is a level of sensitivity around the deficit, economic growth, job growth,” he said.

For the entire Manhattan market, tenants inked 4.27 million square feet in new deals in June, compared with 2.84 million a month earlier, while the availability rate fell by 0.7 points to 11.3 percent, the CBRE figures show.

The average asking rent overall rose $0.62 per foot to $51.93 per square foot.

In Midtown, new leasing was led by Nomura Holding America taking 900,385 square feet at Worldwide Plaza at 825 Eighth Avenue, adding to the total of 2.24 million square feet leased. The availability rate dropped by .4 points to 11.7 percent, while the average asking rent rose by $0.91 per square foot to $60.75 per foot.

In Midtown South, leasing activity slowed by 60,000 square feet to 420,000 square feet, while the availability rate dropped by .2 points to 10.3 percent. The average asking rent was nearly flat, rising by $0.07 per foot to $43.94 per foot.

Downtown, the leasing volume shot up to 1.43 million square feet, largely because of the Conde Nast deal, from 440,000 square feet in May, the statistics show. (The Conde Nast deal was included in leasing volume, but not in leasing availability.) The availability rate dropped sharply by 1.5 points in June to 11.3 percent. But that decline was due in large part to more than 1 million square feet of space being removed from the market at 40 Rector Street for conversion to a commercial condominium and 70 Pine Street for conversion to residential and hotel. The average asking rent rose by $0.33 per square foot to $39.11 per foot.

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