Manhattan’s overall office vacancy rate has reached a five-year high, according to Cushman & Wakefield’s third-quarter commercial real estate market report. Vacancies reached 11.1 percent by the end of third-quarter 2009, marking a 0.6 percent increase from a quarter earlier.
The amount of space leased year-to-date totaled 11.3 million square feet, down 27.8 percent from the same time last year when leasing volume was 15.7 million square feet.
This decline in leasing activity comes even as average asking rents dropped to $57.08 per square foot, a 5.2 percent decline from the second quarter.
While sublease activity has been steadily increasing throughout the year, the third quarter saw a reduction in inventory to 11.1 million square feet from 11.4 million square feet in second-quarter 2009. Still, 12 of the 54 lease transactions totaling 50,000 square feet so far this year, as of the third quarter, were subleases.
Joseph Harbert, COO of Cushman & Wakefield’s New York Metro region, said that the high sublease activity is an indication of market instability, in a press release.
“A decline in sublease space is indicative of the market beginning to move towards stabilization,” Harbert, said. “Historically, high-quality sublease space, which is competitively priced, comes off the market first.”
The report attributed the decline in sublease inventory in part to steep discounts.
The company expects the vacancy rate to rise.
“Overall we expect vacancy will continue to rise reaching a peak of somewhere about 14 percent in the middle of next year, and that will include the new construction completions as well as the expectation that we will still have negative absorption,” Kenneth McCarthy, a managing director of research for the New York area, said at today’s breakfast briefing on the data. TRD