Manhattan office vacancy rate tumbles in May

Biggest month-to-month drop in availability since 2006

New York /
Jun.June 06, 2014 12:01 AM

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.


Related Articles

arrow_forward_ios
Jeff Gural’s GFP borrows $191M on 40 Worth Street
Jeff Gural’s GFP borrows $191M on 40 Worth Street
Jeff Gural’s GFP borrows $191M on 40 Worth Street
Arch's Jeffrey Simpson and Adam Neumann with 88 University Place (Arch Companies, Getty, Google Maps)
Former WeWork hub, hollowed out by IBM’s exit, gets $70M refi
Former WeWork hub, hollowed out by IBM’s exit, gets $70M refi
Upflex co-founders Christophe Garnier and Ginger Dhaliwal (Upflex, LinkedIn/Ginger Dhaliwal, iStock)
Upflex raises $30M, signaling rise of flex-office aggregators
Upflex raises $30M, signaling rise of flex-office aggregators
(iStock)
Banks, tech among departures sinking Midtown office market
Banks, tech among departures sinking Midtown office market
Brookfield Properties' Callie Haines (iStock, Brookfield Properties)
Hedge funds, investment firms rare bright spot for office leasing
Hedge funds, investment firms rare bright spot for office leasing
Ron Perelman with 35 East 62nd Street and 41 East 62nd Street (Getty, Google Maps)
Ron Perelman’s former Lenox Hill offices hit market for $160M
Ron Perelman’s former Lenox Hill offices hit market for $160M
v
Rising interest rates weighing on Vornado’s earnings, Steve Roth says
Rising interest rates weighing on Vornado’s earnings, Steve Roth says
Tiffany and Co's Anthony Ledru with 200 Fifth Avenue (Tiffany & Co, Loopnet, iStock)
Tiffany & Co. trims HQ office lease
Tiffany & Co. trims HQ office lease
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...