Manhattan vacancies continue rise

By Adam Pincus | July 01, 2008 01:22PM

Manhattan commercial real estate vacancy rate increased 1.8 percentage points over the past year to 7.1 percent, according to a mid-year report by brokerage Cushman and Wakefield. The vacancy rate reached its highest level since the fall of 2006.

The increase in the vacancy rate was coupled with increasing asking rents, which hit an average of $71.59 at the mid-year point, a 7 percent rise over last year, the report said.

Joseph Harbert, Cushman and Wakefield chief operating officer for the New York metro region, said that both vacancies and rents were increasing because big amounts of higher-quality spaces were becoming available.

“You have some space coming on the market that is more expensive than space going off the market,” he said at the meeting where the report was released Tuesday.

The softness was broad based. Steep increases in the vacancy rate over the first quarter were seen in Midtown, where it increased from 6 percent to 7.1 percent; Midtown South, from 5 percent to 5.9 percent; and Downtown, from 7.2 percent to 7.7 percent.

Leasing activity, too, fell by 2.2 percent to 11.5 million square feet in the first half of the year.

Investment sales were off sharply from the same period a year before, with $13.8 billion closed or under contract, compared with $34 billion last year.

Foreign investors accounted for nearly half of that volume, up from a high of 15 percent in recent years, the report said.

Retail rents remained strong overall, but in some submarkets they were flat or falling, said Gene Spiegelman, executive director of retail services at Cushman and Wakefield.

Soho saw rents spike, but rents fell on Manhattan’s Upper West Side On Broadway from 60th to 86th streets.

“Soho has developed a very strong international appeal,” Spiegelman said. “It is a must have location for brand expansion.”