Small spaces continue to shuffle through the market, holding up Manhattan’s leasing activity. Midtown South continued to improve compared to Manhattan’s other office markets in June, a phenomenon many believe is occurring because it has an abundance of smaller spaces.
There were only six lease transactions of spaces larger than 100,000 square feet recorded in June, including renewals and expansions, according to reports compiled by CB Richard Ellis, Colliers ABR and The Real Deal. Despite this, the overall leasing activity in Manhattan was 2.28 million square feet, up 34.9 percent from 1.69 million square feet the previous month, according to data published by CB Richard Ellis.
Brokers surveyed by The Real Deal reported that the largest deals they worked on in the last few months were less than 50,000 square feet, and most of the transactions were renewals of existing tenancy.
As of press time, July saw no single deals over 100,000 square feet, according to The Real Deal’s Deal Sheet.
The economic climate, along with rising costs of construction, have made prospective tenants gravitate more quickly toward prebuilt space, according to Howard Dolch, executive vice president at the Lansco Corporation. Dolch said that represents another advantage to landlords of smaller spaces because historically prebuilt spaces are available in the 10,000-square-foot-and-under range.
The borough’s vacancy rate crept up 29 basis points to 5.93 percent in June, from 5.64 percent in May. It is up 1.5 percent from 4.4 percent in June 2007.
The average asking rent for Manhattan was $72.83 per square foot in June, about even from $72.81 per square foot the previous month, and still up 14.7 percent from $63.56 per square foot in June 2007.
Midtown South
“In the past three months, space has been moving well in the transit triangle area,” said Jeffrey Schwartz, senior managing director at Adams & Co. Real Estate, referring to the Grand Central, Penn Station and Chelsea submarkets.
“Everyone is more aware of money these days and moving to areas that are more affordable,” he said. “Many businesses would have never considered these areas in the past.”
Midtown South’s vacancy rate was 6.7 percent in June, making it the only market with a month-to-month decrease — albeit a slight one — falling 10 basis points from 6.8 percent in May. Vacancy there is still well above its 3.9 percent vacancy rate in June 2007.
The average asking rent in Midtown South was $53.05 per square foot in June, up 18 cents from $52.87 per square foot the month before, and up 15.9 percent from $45.79 per square foot in June 2007.
While Midtown South had the least leasing activity in June, 380,000 square feet, the figure was above average for the market, which has the smallest amount of total space of the three markets.
A 98,175-square-foot lease at the Sapir Organization’s 11 Madison Avenue building was the biggest deal in Midtown South in June, according to reports compiled by CB Richard Ellis, Colliers ABR and The Real Deal.
Downtown
Sublet space is expected to represent hundreds of thousands of square feet of space coming on the market in large blocks in the next few months, mostly from financial services tenants in Midtown and Downtown.
A saving grace for Lower Manhattan’s rising vacancy rate is one large block of sublet space there — 803,222 square feet at 180 Maiden Lane, which Goldman Sachs disposed of and was taken by American International Group in an off-market transaction in early June. The market’s second largest deal that month was a 140,164-square-foot lease the New York City School Construction Authority signed at 26 Broadway.
Downtown had the largest flux in asking rent between June and May. Average rent fell to $49.53 per square foot, from $49.70 per square foot the previous month. Asking rent in the submarket is up 5.9 percent from $46.79 per square foot last year.
The vacancy rate Downtown was 7.1 percent in June, up 30 basis points from 6.8 percent the previous month, and up 1.1 percent from 6.0 percent in June 2007.
Midtown
Midtown saw only one transaction over 100,000 square feet in June — an 118,000-square-foot renewal at 345 Park Avenue, signed by financial consulting firm KPMG, according to The Real Deal’s sources. The building has over 300,000 square feet of available space remaining, with a sky-high asking price of $200 per square foot, according to CoStar.
In Midtown, the vacancy rate increased 40 basis points to 5.3 percent in June, from 4.9 percent in May. It was up 1.4 percent from a 3.9 percent vacancy rate the prior year. The average asking rent in Midtown rose incrementally to $86.57 per square foot, from $86.52 per square foot in May, and up from $79.85 per square foot in June 2007.
Midtown’s leasing activity was 830,000 square feet in June, down 28.5 percent from 1.16 million square feet in May.
