Midtown and Midtown South relied exclusively on small and mid-sized deals to stay steady in November, while Downtown languished with its lowest monthly leasing total since March.
With no deals except renewals larger than 100,000 sf in Midtown and Midtown South, the two markets nonetheless produced 1.09 million and 500,000 sf of new leasing transactions, respectively, according to a report by CB Richard Ellis. Downtown, however, continued to languish, producing just 226,000 sf of leasing in November.
Overall, Midtown South availability decreased by 0.2 percent, while there was a 0.1 percent increase in available space in Midtown and a .4 percent increase in Downtown.
A report by Colliers ABR concluded that the office market struggled in November following a relatively positive October, partly as result of additional sublease space hitting the market. Overall vacancy in Manhattan class A space rose from 11.1 to 11.3 percent, the report said. Downtown vacancy jumped from 12.4 percent to 13.7 percent, with Midtown and Midtown South producing mixed results.
Midtown
Despite the lack of large new deals, Midtown’s 1.09 million sf of leasing in November was not far behind its five-year average of 1.18 million sf. But return of space meant that availability was at 13.6 percent, the highest level since 1994.
The month’s largest new lease was the U.S. General Services Administration’s 77,000 sf commitment at 140 East 45th St. Large renewals continued to run strong, with New York Presbyterian Hospital renewing its 211,000 sf at 333 East 38th St. and CBS renewing for 184,000 sf at 555 West 57th St. For the first 11 months of 2003, leasing activity in Midtown totaled 10.1 million sf – 12 percent ahead of last year’s pace to date, and already surpassing the entire total for 2002.
The strong leasing activity was not enough to offset the return of space to the market, however, and resulted in 181,000 sf of negative net absorption in November in Midtown. At the end of November, availability had increased by 5.51 million sf since the beginning of the year.
The Colliers ABR report had a slightly different take from the CBRE report, finding the Midtown class A vacancy rate improving from 11.1 percent in October to 10.8 percent in November. Part of the reason for the improvement was a major block of space that was pulled from availability in the Grand Central submarket, among other factors, the report said.
The Colliers report also found that Midtown rents showed significant improvement in November, climbing to $52.32 from $50.79 the month before. The CBRE report found the average Midtown rent increased $.32 per square foot since June, and that new leases were negotiated at 88 percent of asking rents in November, up from 86 percent the month before.
Downtown
Downtown’s 226,000 sf of leasing in November was the year’s third-lowest monthly total, and the market saw 331,000 sf of negative net absorption during the month. The availability rate was 15.6 percent, according to the CBRE report.
With the exception of Beth Israel Medical Center’s direct lease of 86,000 sf at 160 Water St., all deals in November were smaller than 20,000 sf. Leasing activity for the first 11 months of 2003 totaled 4.02 million sf, 24 percent behind last year’s 11-month pace.
Compounding Downtown’s woes in November was the continued return of space to the market, Newly available blocks included 115,000 sf at 55 Water St., 173,000 sf at 32 Old Slip and 93,000 sf at 90 Church St. Year-to-date negative absorption was better than last year, however- 957,000 sf at the end of November versus 1.96 million sf a year earlier. Availability remained highest in buildings built after 1980 and Primary Pre-War properties – 20.8 percent in both categories.
The Colliers ABR report saw a similar lack of good news on the area in November, with the 13.7 percent class A vacancy rate the highest since the 15.3 percent recorded in March.
The Colliers report said that class A average asking rents in Downtown closed November down 2.5 percent from the month before, at $35.35 per sf. New leases were negotiated at 81 percent of asking rents, an improvement from 78 percent the month before, according to the CBRE report
Midtown South
Midtown South fared the best of the three markets in November, showing signs of an impending turnaround with a 10 percent increase in new leasing compared to the month before and 151,000 square feet of positive absorption, according to the CBRE report. The availability rate of 12.8 percent was the lowest of Manhattan’s three office markets.
Midtown South’s 500,000 sf of leasing activity in November was up from October’s already brisk 454,000 sf. Other than two leases for 61,000 sf- one by Mount Sinai NYU Health at 1 Park Ave., and the other a sublease by FOJP Service Corporation at 63 Madison Ave. – all new leases in November were of units smaller than 25,000 square feet. As of November, Midtown South leasing was running 27 percent ahead of the pace the year before.
Helped by the positive net absorption in November, net absorption year-to-date was a positive 246,000 sf. This represented a dramatic improvement from 2002, when Midtown South endured 2.10 million square feet of negative absorption through November, according to the CBRE report.
The Colliers ABR report had a different take on the area, seeing an increase in the class A office vacancy rate to 7 percent, from 6.3 percent the month before. The cause was an additional 94,000 sf of sublease space placed on the market by Primedia and Arnold Worldwide at 110 Fifth Ave., the report said.
Average asking rents slid to $29.37 per square foot, compared to $32.43 the month before, the Colliers report said. The CBRE report said asking average rents in Midtown South had risen 7 percent in Midtown South in the past 12 months, and that new leases were negotiated at 84 percent of asking rents in Midtown South in November, up from 83 percent the month before.
Despite the absence of deals over 100,000 square feet in November, there had been a high number of deals in that category over the course of the year. By October, Manhattan had seen 15 100,000 plus sf leases in 2003-a figure that equaled the total for all of 2002, according to Cushman & Wakefield.