While there was little or no change in asking rents in Midtown and Midtown South last month, Downtown saw a moderate drop after landlords cut prices in anticipation of higher vacancy rates in the coming months, a new Manhattan office leasing report covering February from commercial service firm Jones Lang LaSalle shows.
The average asking rents in Midtown did not change from January, at $59.43 per square foot, while in Midtown South, the average asking rents rose by 3 cents from the prior month to $43.79 per foot, JLL reported.
But Downtown, asking rents fell by 31 cents in February to $36.97 per square foot, the data show.
James Delmonte, a JLL vice president and director of research, said that for Manhattan, overall pricing has flattened compared to the steep drops seen last year, but Downtown asking rents dipped as landlords expected more available space to be put on the market.
“There are adjustments in pricing ahead of [an] anticipated continued rise in vacancy rates,” he said.
For Manhattan overall, there was little change to the vacancy rate. The rate fell by .2 points in Midtown to 14.1 percent, while in Midtown South the rate was unchanged at 10.9 percent. Likewise Downtown, the rate did not change, and remained at 8.8 percent, the lowest of the three markets.
Citywide, the data shows asking prices rising in select neighborhoods, including Class A buildings in Columbus Circle, Grand Central and Penn Plaza/Garment, with the biggest Class A increase in the Grand Central area where the asking rent rose by 58 cents to $59.59 per foot. The largest drop in Class A asking rents was in Gramercy Park in Midtown South, where rents fell by $1.42 per foot to $37.76 per square foot.
But Delmonte cautioned that even the increases noted in Class A buildings should not be seen as a rebound in pricing. Rather it is the result of tenants scooping up the lower-priced spaces leaving relatively higher-priced blocks on the market.
“I think you are going to see this phenomenon for much of the year. You might see rental rates go up a bit, but it is not really a result of the landlords raising prices. It’s just a result of the mix of space as less expensive space comes off the market,” Delmonte said.