Manhattan office market shows signs of life

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From left: 30 Rockefeller Center, a rendering of Four World Trade Center and the Empire State Building

Manhattan’s commercial office market shows signs of a long-awaited
rebound, as new leasing activity jumped to 7.6 million square feet during
the first quarter of 2011, marking the highest figure since the third quarter of
2006, according to data released today by Cushman & Wakefield.

The improving market helped property sales more than double to $5.5
billion from $2.3 billion in the year-ago quarter, while the office vacancy
rate fell to 10 percent from 10.5 percent at the end of December. Leasing
was up by 1.9 million square feet, or 34 percent higher than during first-
quarter 2010.

“On top of a very strong fourth quarter for new leasing activity, we’ve
kicked off 2011 with even more momentum from pent up demand and
decisive moves on the part of Manhattan businesses and organizations,”
said Joseph Harbert, COO for Cushman & Wakefield’s New York Metro
region. “The strongest indicator of a shift in market direction is positive
absorption, and this quarter’s activity has really demonstrated that demand is
outweighing supply in the market today.”

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He said Manhattan had 439,000 square feet of positive absorption, which
indicates more space is being leased, when compared with the amount of
space available on the market.

During the quarter, several major leases were signed, including a 619,000-
square-foot lease by the city at Four World Trade Center, a 482,000-square-
foot lease at the Empire State Building by Li & Fung and a 420,000 square-
foot-lease at 30 Rockefeller Center by Lazard.

All three of Manhattan’s major submarkets, Midtown, Midtown South and
Downtown, showed declines in vacancy. Midtown’s vacancy rate fell to 10.3
percent from 10.6 percent at the end of December and from 12.6 percent in
the year-ago quarter. Midtown South’s vacancy rate fell to 8 percent, from
8.6 percent at the end of December and from 9.9 percent a year ago. The
downtown vacancy rate fell to 10.5 percent, compared with 11.5 percent at
the end of the quarter. Despite the positive momentum, vacancies are up 0.5
percent from a year ago.

The sublease rate fell to 1.5 percent from 1.9 percent at the end of December
and from 2.6 percent a year ago. Sublease space represents only 15.4 percent
of all available office space, down from a peak of 28.2 percent in April