Overall Manhattan office leasing market struggles while high-end market soars

By Adam Pincus | July 02, 2010 10:00AM

From left: Lever House, the Seagram Building

Despite two of the most expensive leasing deals of the year closing in
recent weeks, the Manhattan office market has still not turned the
corner, said Robert Sammons, managing director of research at Cassidy
Turley (see full report below).

Last
month the most expensive deal of the year, with an effective rent of
$120 per square foot at the Lever House at 390 Park Avenue, was signed,
while another deal for an effective rent of $114 per square foot at the
Seagram Building at 375 Park Avenue, also closed, Sammons said, citing
his firm’s records.

But that activity does not signal an
improvement of the overall office market, just that an appetite remains
for trophy properties on Park Avenue, he said.  

In
Midtown, “We still see lots of deals in the $40s, $50s and $60s,” per
square foot, Sammons said. “In early 2008, seemingly across the board
we saw deals in the $90s. That is certainly not the case and I don’t
think it will be for some time.”

Sammons would not identify the
Park Avenue tenants, and RFR Realty, which owns the buildings, declined
to comment. The effective rent is the actual rental cost including
landlord work contributions and free rent.

The June office
market report from Cassidy Turley, released today, revealed positive
signals with a decline in the Manhattan vacancy rate by .3 points to
12.8 percent, the lowest figure since April 2009. But at the same time
asking rents fell by 47 cents per foot to $47.95 per square foot, the
report says.

Overall, the market is giving mixed signals with
strong employment numbers providing encouragement while unease about
the global economy and uncertainty about financial reform are giving
companies pause before they ink lease deals, Sammons said.

In
the Midtown market, the vacancy rate was 12.8 percent in June, a
decline of .4 points from May, but average asking rents fell 25 cents
to $55.29 per square foot.

The situation was worse in Midtown
South, where the vacancy rate rose by .1 point to 13.5 percent and
asking rents declined by 90 cents per foot to $38.22 per square foot,
the company reported.

Downtown remained nearly unchanged, even
as insiders expect the large blocks of space controlled by financial
firms to come on the market. The vacancy rate remained flat at 12.4
percent, and the average asking rent rose by 3 cents to $37.97 per
square foot, the report shows.

CassidyTurley June