The office vacancy rate in Midtown jumped to its highest level since late 2010 as big blocks of space hit the market and leasing activity remained slow, data from commercial services firm Cushman & Wakefield shows. Midtown saw its vacancy rate jump by 0.7 points in the third quarter — compared to the previous quarter — to 10.5 percent. It was the highest figure since the fourth quarter of 2010, when the vacancy rate was 10.6 percent, Cushman figures show.
In addition, new leasing activity for Manhattan overall fell by 30 percent in the first three quarters of the year to 16.8 million square feet, down from 24 million square feet in the first nine months of 2011, which was an unusually active year. Meanwhile, investment sales through the third quarter totaled $13.6 billion, a decrease of 30 percent from the $19.4 billion in sales that closed during the first nine months of 2011, Cushman figures show. The Cushman vacancy rate tracks space that is vacant now or will be vacant during the next six months.
Louis D’Avanzo, a leasing broker and vice chairman at the Midtown-based firm, said the leasing figures trailed last year’s numbers because companies were not aggressively pursuing deals. He was speaking at the company’s third quarter media briefing held this morning in Midtown. “We are seeing on the demand side of the equation, it’s sort of just muddling along and kicking the can down the road,” he said. “Though in some ways it seems it’s more of Dumpster than a can. But we are still hanging in there, moving forward.”
The overall Manhattan office vacancy rate was 9.6 percent, up from 9 percent in the second quarter. The average asking rent dipped in the third quarter by $0.03 per foot, to $58.83 per square foot.
Ken McCarthy, senior economist and a senior managing director at Cushman, said a decline of 2,500 New York City office jobs between May and August reported by the U.S. Bureau of Labor Statistics likely slowed demand for space. “I think that partly explains why the market in the third quarter was not as robust [in leasing] as we’ve seen in previous quarters,” McCarthy said.
Even as investment sales declined, sales of distressed investment properties in Manhattan nearly ground to a halt in the third quarter of the year, dropping to about 5 percent of all activity, the Cushman figures show.
“The drop in volume, we believe, is due to the reduction in distressed property sales,” Helen Hwang, a company vice president said. While Class A office building activity was off by 50 percent compared with 2011, activity for deals between $20 million and $100 million was better.
“The middle market is very strong,” Hwang said.