December Midtown leasing less than half six-year average

By Adam Pincus | January 06, 2009 12:04PM

The amount of Midtown office space leased in December was 60 percent lower than the average volume of square feet leased the same month over the past six years, according to real estate firm Cushman & Wakefield.

There was just 550,000 square feet leased in December in Midtown, far off the December average of 1.38 million square feet.

“It is a story of a market that has gone on hold, or taking a pause. Maybe it ran out of a little gas at the end of the year,” said Joseph Harbert, COO of Cushman’s New York metro region, at a presentation of the company’s year-end report on commercial sales and leasing this morning.

Midtown had the highest vacancy rate of the three Manhattan submarkets — Midtown, Midtown South and Downtown — and the greatest drop in asking rents — some $5 per square foot — in a single quarter in recent memory, Harbert said.

The weak average for Midtown last month capped off the borough’s lowest leasing volume since 2001. In 2008, 19.1 million square feet of office space was leased, a 19 percent decline from the 23.5 million square feet leased a year earlier, and the lowest amount since 18.9 million square feet in 2001.

The fourth quarter 2008 office vacancy rate in Manhattan was 8 percent, a rise of 2.3 points from 2007, and the average asking rent was $69.44, a 6.7 percent rise from the same period in 2007. In Midtown, vacancies rose 2.8 points to 8.5 percent over the same period in 2007. In fourth-quarter 2008, rents rose 4.7 percent compared with fourth-quarter 2007 to $79.81, but that figure was a $5 drop from a high in October.

“We don’t recall seeing drops like this in recent history. Five dollars in three months is a big drop,” Harbert said.

The Midtown South vacancy rate was 7.1 percent in the fourth quarter, a 2.4 point rise from 2007, while average asking rents rose 15 percent to $54.09. Downtown vacancy rates increased to 7.4 percent, a 1.2 point increase from 2007, and average asking rents increased by .8 percent to $47.86.

In Brooklyn, the office market ended the fourth quarter with a vacancy rate of 7.9 percent, which was a slight .2 point increase from the same period in 2007, and an average asking rent of $29.77, which was a 2.1 percent drop from a year earlier, the Cushman data showed.