Big blocks push up office vacancy, more expected

By James Kelly | July 29, 2008 01:12PM

Fifty-four blocks of office space with 100,000 square feet or more were on the market in Manhattan by the end of the second quarter, up from 40 at this time last year, according to a quarterly report published by brokerage Colliers ABR. Another 23 blocks of space in that range are expected to go online by the end of the year.

The big increase in available space had an effect on Manhattan’s vacancy rate, which increased 90 basis points to 8.7 percent in the second quarter, according to the report. The borough’s vacancy rate could reach 10.7 percent by the end of the year if the additional large blocks of space slated to hit the market do so within the next two quarters, the report said.

The borough’s average asking rent crept up by 2.1 percent to $66.75 per square foot. Meanwhile, the average asking rent for Class A space slipped .3 percent to $87.10 per square foot, down from $87.38 per square foot in the first quarter.

The market is still absorbing all of the new high-grade space. Class A vacancy increased 130 basis points to 7.0 percent, the report said. Class A inventory accounted for over 75 percent of the increase in availability last quarter

The vacancy rate in Midtown increased 110 basis points to 8.2 percent. Downtown, the vacancy rate increased 160 basis points to 8.6 percent.

Midtown South managed to post a 20 basis point decrease to a vacancy rate of 10.0 percent, the report said.