All three Manhattan office markets showed strong activity in May, according to a recent report by CB Richard Ellis.
As Midtown continued to experience brisk leasing, activity in Midtown South increased 47 percent over the previous month, and Downtown leasing more than doubled the rate of the previous month.
But a report by Colliers ABR came to a different conclusion, saying the month was “a bit weak” in regard to leasing activity.
The Manhattan class A vacancy rate climbed to 10.7 percent in May from 10.6 percent in April, still significantly less than the 11.3 percent recorded in December.
The rise was largely due to the Times Square Tower coming online. That added 700,000 square feet of direct space to the market. It was unclear whether the CBRE report included the addition of space.
The Colliers report also said that there is a “strong belief” that the rest of the year will see a pickup because of more tenants entering the market.
Even financial services firms have begun to add employees in the rebounding economy and are searching for additional space once again, the report said.
Partly as a result of a desire by financial services firms to hold space for their own use, “shadow space/future space on the market” dropped in the past five months from approximately 9 million square feet in December 2003 to 5.3 million square feet in May.
Class A average asking rents dropped to $47.55 per square foot from $47.68 a square foot in April, though they remain higher than the $45.59 a square foot at the close of 2003, the report said.
Midtown
With 1.16 million square feet in leasing, Midtown continued to see brisk activity in May–the seventh consecutive month with volume exceeding 1 million square feet, according to the CBRE report.
Year to date, leasing has exceeded activity during the same period last year by 65 percent, the report said.
The top Midtown leases were Dreyfus Corporation’s renewal and expansion for 372,000 square feet at 200 Park Avenue and Rodale Press, Inc.’s lease for 114,000 square feet at 733 Third Avenue.
The Colliers report found that with approximately 700,000 square feet of direct space added to the market with Times Square Tower, the vacancy rate in Midtown climbed to 10.6 percent from 10.2 percent in April.
The increase may be short-lived, especially in the new tower, as a number of tenants in the market are looking for new or expansion space.
“For the large users, the choices seem to be narrowing at the high end,” said Howard Nottingham, executive managing director at Studley.
The class A average asking rent closed May down slightly at $54.17 per square foot from $55.02 per square foot in April, the Colliers report said.
Midtown South
While leasing in Midtown increased over the previous month’s activity by nearly half, there was negative net absorption of 197,000 square feet in Midtown South in May, according to the CBRE report. Absorption for the year to date moved slightly into negative territory.
Asking rents remained stable, increasing by 13 cents in May to $31.88 per square foot.
The top Midtown South leases were the Federated Department Stores’ lease for 52,000 square feet at 11 Penn Plaza and Automatic Data Processing’s 32,000-square-foot lease at 1 Penn Plaza.
The Colliers report did not include data on Midtown South.
Downtown
With Downtown leasing activity double the month before, availability tightened and absorption for the month was positive, the CBRE report said.
For the first five months of 2004, velocity has exceeded the year-ago performance by 18 percent, the report said. Availability improved by 0.1 percent.
The top Downtown leases were New York State Department of Transportation’s lease for 34,000 square feet at 199 Water Street and the Port Authority of New York & New Jersey’s lease for 19,000 square feet at 115 Broadway.
The Colliers report also found that the Downtown class A market improved in May, with the vacancy rate closing at 12.5 percent from 12.9 percent in April.
Meanwhile, the class A average asking rent climbed slightly to $33.99 a square foot from $33.70 a square foot in April.
Jobs
The city comptroller’s office said the city’s economy grew 7 percent during the first quarter of the year, its highest quarterly growth rate since late 1999.
The office cited 21,100 new payroll jobs during that quarter and a 27 percent jump in personal income tax revenues as the main factors indicating growth.