The information and media sectors took over for financial services as the most active sector in office leasing in Manhattan in the first quarter of 2012, according to Joseph Harbert, COO of Cushman & Wakefield. Harbert announced the trend at a Cushman commercial outlook breakfast this morning at Michael’s restaurant, off Fifth Avenue.
Information and media, which includes the technology sector, accounted for 27.8 percent of office leasing in the first quarter by square footage, according Cushman’s figures, whereas financial services accounted for only 26.3 percent. This marks the first time the media sector has overtaken Wall Street in leasing activity since Cushman began recording numbers, in 1999, Harbert said.
Last year in the first quarter, information and media accounted for 11.6 percent of leasing, and financial services 20.8 percent.
“New York is not just a financial town anymore,” said Ken McCarthy, senior economist and senior managing director at Cushman. “While it is and always will be an important financial capital, we’ve diversified into many other industries and have seen growth in technology, professional services, education and health, leisure and hospitality.”
But while the Midtown South market still boasts the nation’s lowest vacancy rate, at 5.9 percent, down from 6.4 percent a quarter earlier, in the “overall… marketplace, we’re kind of at equilibrium,” Harbert said.
Perhaps a symptom of the end of financial services’ supremacy, smaller leases accounted for much of the leasing activity in the first quarter, brokers said. Only 13 deals of at least 100,000 square feet were completed in the first quarter, and the number of deals in the 10,000- to 25,000-square-foot range represented 32.7 percent of the total number of transactions, up from 21.1 percent year-over-year.
On the whole, brokers lamented a sluggish market at the breakfast, but said they anticipated a much stronger second half of the year in 2012.
Overall leasing activity slowed in the first quarter, with 5.8 million square feet leased, according to Cushman’s statistics, down 24 percent from 7.6 million square feet in the first quarter of 2011. But, the average asking rent for Manhattan office space hit $58.90 per square foot at the end of March — an increase of 7.6 percent year-over-year. The three major submarkets – Midtown, Midtown South and Downtown – all saw increases, of 1.9 percent, 5.6 percent and 0.8 percent, respectively.
The Manhattan-wide vacancy rate remained consistent in the first quarter and hovered around 9 percent, Harbert said. Despite more inventory slated to come on the market at the World Trade Center site, Cushman predicted the vacancy rate would fall even further — to 8 percent in the next two years — especially if the financial sector returns to its former strength.
In Midtown South, which has seen the lowest vacancy rate and the fastest growth in asking rent among the three markets, Class A office space had an average asking rent of $67.52 in the first quarter, up from $57.44, an increase of $10.08 from last quarter. The market also had a 33 percent increase in average asking rent year-over-year, bringing the average to only $4.56 less than that for Class A Midtown properties, though Midtown remains the priciest market in Manhattan. Downtown, the market was steady, with a vacancy rate of 9.2 percent, down from 9.5 percent last quarter. Asking rents increased to $40.37 per square foot, up $0.49, or 1.2 percent, from last quarter in that market.