The office leasing market in Manhattan has been slow of late, but it’s still recovering faster than office markets in nearby suburbs. The Wall Street Journal said that actually runs against office leasing trends typical of past recovery cycles.
Reis data showed the Manhattan office vacancy rate to have declined to 10.2 percent in the second quarter, down 1.5 percentage points from the first-quarter 2010 peak. On the other hand, vacancy rates were 18.1 percent in Westchester, 18.6 percent in northern New Jersey and 20 percent in Fairfield County. Nationally, the downtown vacancy rate is 7 basis points below its 14.9 percent peak, compared to just 5 points for suburban markets from their 19.2 percent peak.
The Journal attributed the trend’s reversal to three factors. First, in this recovery, larger companies are hiring at a faster clip than smaller ones, which are typically headquartered in suburbs, because they have better access to financing. Those new hires breed a need for new space. Second, American lifestyle changes have made downtown a more popular living choice in many parts of the country than suburbs. Companies are following those workers. Finally, the rise of telecommuting is compelling businesses to ditch suburban offices and hold on only to those spaces located in central business districts.
In an examination of Connecticut’s office leasing market in the August issue of The Real Deal, local brokers said huge incentives have become the norm for landlords. [WSJ]