The Real Deal New York

Midtown continues streak as availability drops

October 01, 2003
By The Real Deal

Midtown welcomed a decrease in the amount of available office space for the second straight month in August, while Downtown and Midtown South saw an increase in available space amid lackluster leasing, a report by CB Richard Ellis said.

CB Richard Ellis also reported that tenants achieved an average tenant-improvement allowance of $39.02 sf and an average rent abatement of six months in Midtown leasing transactions concluded over the last three months.

The data was part of a new measure of the value of lease concessions, called the Concession Values Index, that will now be published by CBRE on a monthly basis. A Taking Rent Index – which will track the difference between published asking prices for office space and the initial taking rents that tenants actually pay when deals are consummated – was also set to be launched in late September by the company.

In reports from other companies, Colliers ABR saw Midtown class A vacancy levels improve in August, while Downtown and Midtown South fared worse than the month before. Grubb & Ellis, by contrast, noted a slight drop in vacancy in all three office markets.


Midtown posted its second consecutive month-to-month decrease in its availability rate from 12.4 percent in July to 12.3 percent in August, only the second monthly decrease since August 2002, CB Richard Ellis reported. The market experienced positive net absorption of 181,000 sf.

Midtown recorded 712,000 sf. of new leasing in August, a 21 percent increase over July s 588,000 sf but lagging 44 percent behind the five-year average for August of 1.27 million sf. The largest new lease was for 50,000 sf of expansion space by Kasowitz, Benson, Torres & Friedman at 1633 Broadway. Kasowitz, Benson concurrently signed an extension for 100,000 sf at the site.

Midtown s year-to-date leasing activity through August was 6.82 million sf compared to 6.90 million sf for the same period last year, meaning that leasing activity so far this year is now slower than last year in Midtown. Average asking rents in Midtown dropped an incremental $0.22 per sq. ft. in August, settling at $49.32 per sf .

Colliers ABR saw a slight drop in the class A vacancy rate in Midtown, from 10.5 percent in July to 10.3 percent in August. Grubb & Ellis noted positive net absorption, and said that vacant sublet space dropped 7.1 percent, due mostly to Pfizer s move into 274,604 sf of sublet space it leased in February.


Downtown, concessions packages over the past three months ranged from 1 month of rent abatement with no tenant improvement allowance for as-is space to 16 months of rent abatement and $45 per sf tenant improvement allowance for raw space, CB Richard Ellis reported.

Downtown s availability rate rose from 15.0 percent in July to 15.2 in August, and there was negative net absorption of 114,000 sf., which represented a tightening from July s historically high negative net absorption of 774,000 sf.

August leasing activity Downtown was a lackluster 228,000 sf, down 15 percent from July s already tepid 268,000 sf and a fraction of August 2002 s 426,000 sf.

In a month of low leasing activity throughout the city, Downtown s largest new lease in August State Street Bank Corporation s sublease of 84,000 sf from Merrill Lynch at 2 World Financial Center was also the largest in Manhattan. Year-to-date leasing activity is down compared to last year. Downtown rents decreased by $0.48 per sf.

Colliers ABR saw class A vacancy rates rise for the second straight month, closing at 12.7 percent in August, up from 12.4 percent in July. Grubb & Ellis saw Downtown vacancy drop 30 basis points in August to 13.3 percent.


In Midtown South, concessions ranged from three months of rent abatement with no tenant improvement allowance for as-is space to seven months of rent abatement and $50 per sf tenant improvement allowance for raw space, CB Richard Ellis reported.

Midtown South s availability rate increased from 12.7 percent to 13.1 percent. The market s single largest new lease in August 24,000 sf. at 5 Penn Plaza is emblematic of the preponderance of small transactions in 2003, according to CBRE. In total, leasing activity was 194,000 sf. Year-to-date, leasing activity has outpaced 2002.

Average asking rents in Midtown South also decreased, from $31.41 per sf in July to $31.33 per sf in August.

Under CB Richard Ellis new Concession Values Index, rent abatement and tenant-improvement allowances will be tracked per sf for new leases. Transactions considered include new leases of 10,000 sf or greater for raw space in Midtown, and new leases of 5,000 sf or greater for both raw and as-is space in Downtown and Midtown South, on a rolling-three-month basis.

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