In a tightening Manhattan commercial market marked by steady demand, brokers and their clients can’t lose sight of one central fact — space is still available. It just costs more and more, month after month, and it probably won’t be found in Midtown, where the vacancy rate dropped in July to 7 percent from 7.4 percent in June.
The Manhattan commercial vacancy rate dropped to 8.3 percent in July, from 8.5 percent in June and 10.4 percent a year ago, according to brokerage Colliers ABR. A second-quarter report from brokerage Cushman & Wakefield put the overall vacancy rate even lower, at 6.9 percent, by June 30. That was down from nearly 8 percent during the first quarter of 2006.
Still, three spaces of at least 110,000 contiguous square feet hit the market in July, according to Colliers ABR: 220,000 square feet at 1540 Broadway, 110,000 square feet at 99 Hudson Street and 511,000 square feet at 95 Wall Street.
“In a market of 350 million square feet, there, of course, is space available,” said Dirk Hrobsky, a senior vice president at brokerage Trammell Crow. “If you’re a very, very large player — if you’re 300,000 square feet and up — your options are limited. But, for the typical tenant — 20,000, 30,000, 40,000 square feet — you have enough options to not be locked out of the market. But, again, those options are more expensive and there’s more competition.”
At least four leases of more than 200,000 square feet were inked in July. The law firm Akin Gump Strauss Hauer & Feld took 203,000 feet at the new One Bryant Park, and clothier Limited Brands leased 320,000 square feet in a consolidation at 1740 Broadway.
Also, investment firm Alliance Bernstein renewed and expanded by 227,000 square feet at 135 West 50th Street, and consulting firm AON expanded by 221,000 feet at 199 Water Street.
Otherwise, leases in July were smaller. Publisher Mansueto Ventures signed a 40,000-square-foot lease in 7 World Trade Center and Adelphi University committed to a 36,000-square-foot expansion at One Hudson Square.
Rents keep climbing in a Manhattan market analysts describe as the healthiest since the dot-com days — if you’re a landlord — and the most competitive if you’re a business hunting for space. Overall, the average asking rent for Manhattan commercial space increased to $46.25 a square foot from $45.51 in June, according to Colliers ABR; the July average represented a nearly $5 increase from July 2005.
Midtown
More than 10 percent of all office space leased in Midtown for the year to date was let in July, when businesses inked 1.86 million square feet worth of deals, according to brokerage CB Richard Ellis. This was down from the nearly 3 million square feet leased in June, but up from the 780,000 leased in July of last year, suggesting that activity in the city’s busiest submarket continues to gather steam despite higher rents.
The average asking Midtown rent hit $56.05 in July, up more than $1 over June, but that tells only part of the rent story. Rents for the choicest office space in the submarket keep rising. In the Akin Gump Strauss Hauer & Feld deal at One Bryant Park, now under construction, the rent was at least $100 a square foot, the highest rent ever to be paid for so large a space in Manhattan, according to the New York Post.
One market analyst told The Real Deal that top Midtown rents have risen to $140 to $160 a foot. Twenty Manhattan leases were signed in the first six months of 2006 with asking rents of above $100 a foot, according to Cushman & Wakefield; only 10 such pricey deals were signed in all of 2005.
Midtown South
Asking rents in Midtown South also rose from June through July. The average was $35.70 a foot in July, up by 19 cents from the month before and up by nearly $5 from July 2005, according to Colliers ABR. The average asking rent for Class B space, which dominates the submarket, was $37.34 a foot, up from $37.10 in June and $33.06 in July of last year.
The Class B vacancy rate in Midtown South declined to 10.2 percent in July from 10.6 percent in June. The vacancy rate overall dropped from 8.5 percent in June to 8.3 percent in July, according to Colliers ABR, continuing a slide from a rate of nearly 10 percent last summer.
In July, businesses leased 360,000 square feet of space in Midtown South, according to CB Richard Ellis, down from 810,000 square feet in June, but well above the 270,000 square feet leased in July 2005. The 2.91 million square feet leased by July 30 in Midtown South outpaces the 2.81 million square feet leased during the same time in 2005.
Downtown
Leasing in Downtown was strong in July as businesses inked deals for 720,000 square feet of space in the submarket, compared to 500,000 feet in June and just 260,000 in July 2005. In fact, according to CB Richard Ellis, businesses leased 2.86 million square feet of space in Downtown in the first seven months of this year; during the same time in 2005, only 2.49 million was leased.
The vacancy rate in Downtown remains lower than it was last summer. In July, it increased slightly from June to 11.9 percent, according to Colliers ABR; in July 2005, it was 12.9 percent. The average asking rent for Downtown commercial space rose $1.47 a square foot, on average, to $38.12 a foot in July.