Yet landlords eager to sign tenants despite low rents
As average asking rents in Midtown remain depressed at rates last reached in 2006, some financial and legal services firms are expanding on a level not seen for two years, a top broker from CB Richard Ellis said.
Select firms are signing deals for more space than they had under their previous leases, Michael Geoghegan, a company vice chairman, said, a change from the popular trend seen in the downturn, in which firms shrunk to conserve space when they moved or renewed a lease.
“One good gauge for the health of a particular industry is to understand when they relocate or renew, are they taking net more space,” Geoghegan said. “In some cases we are starting to see that. We hadn’t seen that in 2008, and into 2009, but… on the financial services front, as well as on the legal front, we are seeing organizations take more net space.” He did not immediately provide examples of such deals.
Geoghegan was discussing the leasing trends today at CBRE’s quarterly market breakfast briefing for reporters at its New York metro headquarters in Midtown. Also speaking were CBRE’s Sheldon Cohen, a senior managing director; Bradley Gerla, an executive vice president; and Gerry Miovski, a senior vice president.
Leasing volume has picked up in 2010 over the last two years in Midtown, and Geoghegan expects this year to surpass the 14.1 million square feet of new leasing recorded in 2007. Through September, CBRE reported 11.7 million square feet of new leasing in Midtown.
For Manhattan overall, leasing activity was 1.6 million square feet in September, up slightly from 1.53 million square feet a month earlier; and asking rents were about flat, rising just a penny per foot to $47.74 per square foot. That is down from the peak in July 2008 of $71.92 per square foot.
In Midtown, asking rents have been flat for much of the year. Last month the average asking rent was $55.27 per square foot, up by 37 cents per foot from August, when it was $54.93 per square foot.
“We certainly have seen the market stabilize,” Geoghegan said. Speaking about rents, he added, “I’ll say that [rents are] poised for traction. We have not seen a lot of rental traction in the marketplace but we have seen good activity and everything else tells us that we are in a very normalized market.”
And landlords remain eager to negotiate, Geoghegan said.
“Landlords that are sitting with available space today are less price aggressive, more risk averse, so they are in the business to do deals,” he said.
In contrast to Midtown, Downtown saw very little activity, CBRE figures show. There was just 180,000 square feet of new leasing last month in the market, compared with 250,000 square feet in Midtown South and 1.2 million in Midtown, CBRE figures show.
But in a positive sign for Lower Manhattan, there were no large blocks larger than 200,000 square feet returned to the list of availabilities, Gerla, who specializes in the Downtown market, said. He compared that to the first quarter of 2010 when 1.7 million square feet was returned, which was followed by 1.1 million square feet in the second quarter. There were no large blocks expected to be returned to the market in the fourth quarter and perhaps not in the first quarter next year, he added.