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Downtown reports highest office asking rents in six years
Professional sector employment buoys Manhattan office market in third quarter
The Manhattan office market continued along an upward trajectory in the third quarter of 2014, as rising employment increased the number of office users in the borough.
Manhattan Class A office space went for an average ask of $75.76 in the third quarter, up 8.2 percent from $69.97 during the same period last year, according to commercial brokerage Cassidy Turley’s latest Manhattan Office Market report. The borough had absorption of 2.8 million square feet, according to the report, and overall availability tumbled 60 basis points to 9.5 percent – the lowest rate in 24 quarters.
Despite only three large leases being signed in the third quarter, availability in Midtown tumbled 50 basis points to 7.9 percent, the lowest availability rate since the second quarter of 2008. A total of 1.3 million square feet were absorbed, and Class A asking rents rose 7.5 percent to $83.07 in the third quarter of 2013.
The Sixth Avenue corridor, in particular, has had a strong showing as of late with 687,000 square feet of positive absorption and availability that dipped down to 8.5 percent — this despite predictions of doom and gloom.
“The big question is why rents are only up negligibly, despite good activity there this year,” said Richard Persichetti, Cassidy Turley’s vice president of research, marketing and consulting. “Maybe that’s the way to keep tenants in that corridor – keeping rents at or lower than the Midtown average.”
Midtown South, which in the second quarter of 2014 slipped into the red, recorded 4.3 million square feet of positive absorption in the third quarter. Availability tumbled 50 points to 7.9 percent as a result of the rebound, buoyed by eight leases greater than 50,000 square feet. Class A asking rents took a tumble however, falling to $70.30 from $75.02 in the third quarter of last year.
Downtown remains a relative bargain on the office front, despite recording the highest average asking rents the neighborhood has seen in more than six years. Class A asking rents rose to $54.94 per square foot, up 4.5 percent during the same period last year.
Hudson’s Bay Company, the parent company of Saks Fifth Avenue, is consolidating multiple Midtown locations to a 233,000-square-foot space at 225 Liberty Street Downtown, and will also open a 400,000-square-foot department store inside Brookfield Place.