The Real Deal New York

Manhattan office rents lag record leasing volume: Cushman

By Adam Pincus | July 12, 2011 12:25PM

Asking rents for Manhattan office space remain muted even as tenants have
inked deals for more space over the past six months than any time in more than
a decade.

For all types of Manhattan office buildings, average asking rents were up only
2 percent in the second quarter of 2011 compared with the same period a year
ago, or $1.21 per square foot to $55.52 per square foot, figures released by
Cushman & Wakefield today at its quarterly media briefing in Midtown, show.

At the same time, leasing activity rose to 17.6 million in the first six months of the
year, up 40 percent from the same period last year when 12.6 million square feet
of deals were inked, Joseph Harbert, Cushman’s COO said. This year’s activity
was the highest six-month period since 1999, when 18.3 million square feet were
leased from July through December.

Yet that strong activity was not pushing up rents at a similar pace.

Dale Schlather, a company executive vice president, provided the most sobering
comments of the breakfast saying recent negative employment reports from
financial services firms were tamping down the market.

“There is an awful lot of negative sentiment out there that is keeping a lid on the
pot,” he said. “Make no mistake, there have been a number of announcements of
job layoffs on Wall Street of late, and that is a real trend.”

But other brokers at the meeting were more optimistic.

Rents might even surge in Manhattan, Cushman broker Glenn Markman, an
executive vice president, said, if job growth would remain strong for three months
in a row.

“What is going to happen as far as those rent bumps — it is going to happen very
quickly, those rent spikes,” he said.

Josh Kuriloff, a Cushman vice chairman, said some landlords were so bullish that
they were reserving space in nearly-filled buildings in anticipation that rents will
rise much higher.

If the balance of the year is similar to the first half, “you’re heading towards a
record year,” Harbert said.

CBRE had a similarly bullish presentation yesterday, focused on the Downtown

For Manhattan overall, the vacancy rate fell by .6 points in the second quarter to
9.4 percent, Cushman figures show.

For Midtown, the average asking rent rose in the second quarter by $0.76 per
foot to $63.35 per foot, while the vacancy rate fell by .5 points to 9.8 percent.

In Midtown South, average asking rents rose by $0.80 per foot to $44.63 per foot,
while the vacancy rate fell by .9 points to 7.1 percent, which Cushman said was
the lowest for any market it tracks in the United States.

Meanwhile Downtown, the average asking rent rose by $0.16 per foot in the
second quarter to $39.38 per foot, and the vacancy rate declined by .8 points to
9.7 percent, the company data shows.

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