Manhattan vacant space increases even as leasing is strong: Cushman

By Adam Pincus | October 05, 2010 10:30AM

From left: Kenneth McCarthy, Joe Harbert and 85 Broad Street (building photo source: PropertyShark)

Manhattan landlords received positive news last quarter as leasing deal volume remained high, but the market continued to show evidence of weakness through a slight rise in the amount of available office space for rent, figures released today by commercial services firm Cushman & Wakefield show.

Joe Harbert, Cushman & Wakefield’s COO for the New York metro region, said at the company’s media briefing this morning that “all the past three quarters were above their rolling average,” but added, “we still probably have a way to go.”

Tenants have signed 6.2 million square feet of deals in the third quarter, about the same as in the prior two quarters. Through September, there have been 18.8 million square feet of deals signed in Manhattan, up 66 percent from the same period a year ago, Cushman reported.

In addition, the average asking rent for Manhattan overall fell by 51 cents per foot from the same quarter in 2009 to $53.80 per foot.

But the availability rate for Manhattan rose by .1 points to 10.9 percent compared with the second quarter, due mostly to new space being put on the market Downtown including at 85 Broad Street, the former headquarters for investment banking firm Goldman Sachs, which relocated.

“We expected to see the increase in vacancy Downtown this quarter with the addition of space at 85 Broad Street, One New York Plaza and 70 Pine Street,” Kenneth McCarthy, managing director for research in the New York metro region, said.

A report released yesterday by commercial advisory firm Studley showed that the total volume of Manhattan leasing declined in the third quarter to 8 million from 9.6 million in the second quarter, while Cushman showed leasing volume remained about the same. The discrepancy between the statistics is in part because Studley counts all leases while Cushman counts only relocations and expansions.

Following a trend over the past several quarters, the leasing environment Downtown remained weaker than in Midtown and Midtown South.

In Midtown and Midtown South the vacancy rate declined, while it rose Downtown. In Midtown it declined last quarter by .5 points to 11 percent, and in Midtown South it fell by .1 points to 9.2 percent. In contrast, Downtown the vacancy rate rose by 2.2 points to 12.1 percent.

The amount of available space has shifted more toward the landlord, the figures show, with sublease space declining from more than 28 percent of all available space in April 2009 to now just over 18 percent.

In addition to the increase in leasing, the volume of investment sales deals was up sharply in 2010 compared with last year. Through September, buyers had purchased or were in contract to buy $9.4 billion worth of property in Manhattan, up 170 percent from all of 2009, when just $3.5 billion of deals were signed.