The Manhattan office market rebounded in May following an April slowdown, as the media migration Downtown continued and activity in Midtown South held steady with a number of modestly-sized leasing deals, according to the May 2014 Office Market Report from commercial brokerage Cassidy Turley.
Manhattan Class A office rents hit an average ask of $74.59 per square foot in May, a 7.3 percent year-over-year jump from $69.48. Availability dropped 50 basis points to 10.1 percent – the largest month-over-month decline since December 2006, and down from 11.5 percent during the same period last year.
A total of just over 44 million square feet was available in the borough overall, and Manhattan had an absorption of 2 million square feet.
Vacancy rates in Midtown South tumbled 20 basis points to 8.7 percent in May, despite no large leases signed in the period. Class A asking rents, meanwhile, jumped 6 percent to $73.51 from $69.34 in the same period last year.
“There weren’t a lot of large deals done, but a number of smaller ones,” said Peter Hennessy, Cassidy Turley’s president of the New York Tri-State region. “That’s the bread and butter — the majority of deals are 10,000 square feet to 12,000 square feet.”
Availability tumbled in Midtown as well last month, down 40 basis points to 10.3 percent — the biggest one-month drop in 12 months. Demand outpaced supply in six of the area’s nine submarkets, with 931,858 square feet of positive absorption recorded. The snapping up of office properties brought Midtown’s year-to-date absorption total to 1.3 million square feet, despite no lease larger than 100,000 square feet being signed. And Class A asking rents held steady, rising 7 percent to $82.56 per square foot, from $77.15 in May 2013.
Downtown enjoyed a booming month, with availability tumbling 110 basis points to 10.9 percent — a decrease mostly attributed to Time Inc.’s 670,000-square-foot lease at 225 Liberty Street, which contributed to the neighborhood’s 948,000 square feet of positive absorption.
“When you see that 670,000 square feet leased to Time, that has direct impact on absorption rate on Downtown, but doesn’t have direct negative impact on Midtown yet,” Hennessy said. There is a lag between Time signing its new lease and vacating the space it occupies now, which doesn’t show up on the market immediately. “So ultimately, while this is a good story for Downtown, the flip side is that it doesn’t give you a true pulse on the health of the market, because it is a contraction of the actual occupied space from the more than 800,000 square feet Time Inc. currently occupies.”
So far this year, tenants have signed over 1.4 million square feet of leases Downtown. In May, Class A asking rents Downtown rose slightly, climbing 4.9 percent to $55.20 from $52.61 in the same period last year, and well below rates in Midtown South and Midtown proper.