While Midtown office leasing experiences a strong recovery and Midtown South tightens even further, the same cannot be said for Manhattan’s Downtown market, according to a monthly market report from Cassidy Turley.
Manhattan’s net positive absorption was 860,316 square feet in May, according to the commercial brokerage’s June report.
High job growth and low unemployment are two of the key factors driving office demand, the firm said. In the past year through April, the city added 24,300 office jobs — an increase of 102,500 jobs since they bottomed out in August 2009. In addition, the city’s unemployment rate is currently at 7.7 percent — the lowest since March 2009.
Midtown is showing signs of strong recovery. As the demand for space picked up, the market posted another 621,993 square feet of positive absorption in May, putting Midtown in the black for absorption by more than half a million square feet for the year so far. The increase in leasing activity helped drop the availability rate to 11.6 percent in May, down 20 basis points from April.
Midtown South continues to lead the market recovery as the availability rate dropped 110 basis points, to 8.4 percent. The removal from the market of 694,485 square feet at 532 Washington Street, which has sat vacant for seven and a half years, contributed to the 907,204 square feet of positive absorption in May. A group of investors comprising Fortress Investment Group, Atlas Capital Group and Westbrook Partners purchased the remaining interest in the property at the end of last year and will hold the space off the market until a decision is made on its redevelopment potential.
Asking rents in Midtown South continue to increase with Class A up $0.07 to $69.34 per square foot, and Class B up $0.76, to $57.98 per square foot.
Meanwhile, availability in the Downtown market jumped up 70 basis points in May to 14.3 percent. This increase in vacancy is due in part to a 728,736-square-foot space that AIG plans to vacate at 180 Maiden Lane in May 2014. Although expected, this block comes on the market when an additional 5.9 million square feet of new space is expected to hit Downtown with the completion of One World Trade Center and Tower 4 scheduled over the next six to nine months.
The possibility of discounted rents, however, continues to entice media and tech firms Downtown. In May, Class A asking rents dipped, down $0.81 per square foot, to $52.61, while Class B edged up $0.13, to $36.21 per square foot. —James Comtois