Manhattan office vacancy rates have dipped below 9 percent for the first time since 2009, according to commercial brokerage Cushman & Wakefield, which also found that a robust Midtown market has propelled overall asking rents to a seven-year high.
The declining vacancy rate, which hit a six-year low of 8.8 percent, saw asking rents in the borough climb to more than $70 per square foot for the first time since 2008, according to Cushman.
Class A asking rents averaged nearly $76 per square foot across the borough – a 7.2 percent increase year-over-year – and the brokerage saw rent increases in 18 of the 20 Manhattan submarkets it tracks, according to Ron Lo Russo, Cushman’s New York Tri-State Region president.
The Midtown market’s 10.5 million square feet of new leases through the first half of 2015 represented a 12.5 percent year-over-year increase. Vacancy rates in Midtown fell to 8.9 percent.
Downtown vacancy rates at the end of the second quarter stood at 10.3 percent, while Midtown South “continues to be the tightest Central Business District in the nation” with vacancy at 6.2 percent, according to Cushman.
While the Downtown and Midtown South markets continue to see asking rents reach “all-time highs,” Midtown rents are still operating roughly 10 percent below their previous peak during the last cycle, Cushman executive vice chair Josh Kuriloff said.
But continuing tightness in the Manhattan office market could prompt asking rents to climb even higher, Kuriloff said, citing the previous such rent spike in 2005, when vacancy rates in the borough dropped to 7.5 percent.
Investment sales in the city are on pace to exceed $75 billion by year-end and are outperforming initial forecasts of between $60 billion and $65 billion, according to Robert Knakal, the brokerage’s chair of New York investment sales.
The Brooklyn market is on pace to reach a record $9 billion in investment sales, Knakal said, with the number of sales this year already having approached last year’s total.