Office snapshot: Concessions jumped year-over-year, but so did effective rent

Trends are an indication of a "bull market": CompStak

TRD New York /
Jul.July 21, 2016 07:30 AM

Effective office rents in Manhattan rose during the second quarter as asking prices and concessions headed in different directions. Year-over-year, however, incentives like free rent and cash offered to tenants to build out their spaces continue to outpace the growth in asking rents.

Across the borough’s three office submarkets, effective rents grew 4.07 percent from the beginning of the year to $67.44 per square foot, according to CompStak data provided to The Real Deal.

Concession values –the incentives landlords offer in terms of free rent and tenant improvements — during that time fell slightly to 13.36 percent of asking rents, which climbed to $70.90 per square foot. Year-over-year, concessions grew 22.26 percent, while asking rents climbed 14.04 percent.

“That represents a considerable year-over-year increase of 14.41 percent [in effective rents] and an indication of a bull market,” CompStak said in the report, which noted that despite the slight downturn, concessions remain at relatively historic highs.

Concession values held relatively steady in Midtown, where taking rents grew 4.33 percent on the quarter to $73.40 per square foot.

Effective rents in Midtown South grew 2.06 percent to $63.60 per square foot after flat growth in the earlier part of the year. Average concession values “remained elevated, around 12 percent [of asking rents] in the quarter,” CompStak wrote.

In Downtown, average effective rents grew 1.98 percent in the second quarter to $49.58 per square foot, or 18 percent year-over year.

The availability rate in the submarket surpassed that of Midtown for the first time in more than three years, according to CBRE’s TRData LogoTINY second-quarter analysis.

According to Colliers research, Manhattan asking rents are less than 50 cents off from where they were at the last market peak in the third quarter of 2008.

Related Articles

Albert Laboz of United American Land with 430 West Broadway and 419 Broadway (Credit: Getty Images and rendering via YIMBY)

Laboz family plans 2 office developments
in Soho

From left: 1271 Sixth Avenue, 30 Hudson Yards, and 55 Water Street (Credit: Wikipedia)

Manhattan leasing activity up year-over-year while asking rents hit record high

(Credit: iStock)

Office rents in U.S. are going up — barely

From left: McCann Chairman & CEO Harris Diamond, Cohen Brothers Realty President & CEO Charles S. Cohen and 622 Third Avenue (Credit: Getty Images, Google Maps)

McCann inks 450K sf extension at Cohen Brothers’ 622 Third Ave

From left: One Manhattan West, Amazon CEO Jeff Bezos and One Court Square in Long Island City (Credit: Manhattan West, Getty Images, and Loopnet)

After LIC debacle, Amazon sizing up Brookfield buildings for new office: report

From left: 28 West 44th Street, 25 West 45th Street and 183 Madison Avenue with WeWork CEO Adam Neumann (Credit: Google Maps, APF Properties, and Getty Images)

WeWork signed four leases this week for its “headquarters” offering

CompStak CEO Michael Mandel

CompStak raises $12M in round backed by
IA Capital

Even with Midtown South’s slip, Manhattan posts record leasing volumes and asking rents in Q1: report

Even with Midtown South’s slip, Manhattan posts record leasing volumes and asking rents in Q1: report