The Real Deal New York

Trifecta: Manhattan office leasing, asking rents, absorption up 

First time all three metrics have increased during a quarter in 14 years
By Mark Maurer | July 15, 2014 01:00PM

The Manhattan office leasing market saw across-the-board increases in average asking rents, leasing activity and absorption in the second quarter – the first quarter this has occurred since 2000, according to a report from CBRE released today.

Leasing activity in the borough so far this year climbed to 15.6 million square feet from 11.9 million square feet year-over-year. There was 8.3 million square feet of space leased in the second quarter, up from 6.8 million square feet in 2013’s second quarter. In the second quarter, Manhattan had an average asking rent of $65.37 per square feet, vacancy rate of 8 percent, availability rate of 11.5 percent and absorption level of 1.45 million square feet.

If the leasing activity from the first half of this year were to keep up this pace through the year’s end, it would be the highest total in the last decade. In 2006, 29.9 million square feet of Manhattan office space was leased, data show.

Although absorption has grown, it is not “heavily positive” overall, said Peter Turchin, vice chair at CBRE. More than Midtown or Midtown South, the Downtown market held strong with absorption — at 1.9 million square feet in the second quarter, up from 1.1 million square feet year-over-year.

Downtown’s progress was anchored by Time Inc.’s lease for 670,000 square feet and Bank of New York Mellon Corporation’s lease for 346,600 square feet, both at Brookfield Office Properties’ 225 Liberty Street.

Turchin said average Downtown asking rents are about $70 per square feet and higher at One World Trade Center and 4 World Trade Center, while office buildings like 180 Maiden Lane and 85 Broad Street command rents in the range of $40 to $65 per square foot.

“Brookfield captured the middle [of the Downtown office market] really, really well,” Turchin said, adding that L&L Holding Company and Jack Resnick & Sons also serve as top landlords in the area.

While most data was positive, renewals are unlikely to set any records for the year. The borough reported 4.7 million square feet in renewals so far this year. Lease renewals are not expected to surpass the 11.9 million square feet seen in 2012.

“If you’re not changing your space, it’s easy to renew,” Turchin said.

The largest renewal of the second quarter occurred at the Sapir Organization’s 11 Madison Avenue, where Credit Suisse re-upped for 1.07 million square feet.

The total velocity of leasing and renewals in the Downtown market was 4.4 million square feet so far this year. If that figure is matched in the second half of the year, it could surpass 2011, which saw a total velocity of 8 million square feet.