Cracks in Manhattan office leasing market: Cushman execs
Hints of weakness in the Manhattan office leasing market stuck out in a generally positive report on property conditions, provided this morning by executives of commercial services firm Cushman & Wakefield.
Average asking rents were up overall and leasing velocity, although down sharply from last quarter, was still in the traditional range.
“We are right now back to a normal market in terms of leasing velocity,” said Joseph Harbert, COO of Cushman’s New York office, at the quarterly media briefing in Midtown. “We had a great first quarter and we had a great second quarter. It is a healthy market.”
Yet there were causes for concern. The vacancy rate for Midtown Class A properties rose by .1 points to 10.6 percent, and Harbert noted that in the last quarter there had been negative net absorption in some areas of Manhattan.
“When you look at it by quarter, you start to see that we’ve had some negative absorption in the last quarter,” he said. “What you start to see are warning signs.”
Cushman figures show absorption in Midtown fell in the third quarter to 2 million square feet from about 2.2 million square feet in the second quarter. However, for the entire Manhattan market, the figure improved to 3.6 million square feet in the third quarter from 3.2 million square feet in the second quarter.
But there was positive news in the presentation.
There were 6.4 million square feet of new leasing in the third quarter. Although down from the prior quarter, when 10 million square feet was leased, it was ahead of the third quarter of 2010, when 6.2 million square feet was leased.
The overall vacancy rate fell by .1 points to 9.3 percent, and asking rents rose by $0.63 per foot to $56.15 per foot. And for all of Manhattan, there have been 36 deals over 100,000 square feet through the third quarter, compared to the 42 for all of 2010.
In Midtown, the vacancy rate rose by .2 points to 10 percent in the third quarter, while asking rents rose by $0.72 per foot to $64.07 per foot. Meanwhile in Midtown South, the vacancy rate dropped by a full point to 6.1 percent, and asking rents were flat, rising just $0.02 per foot to $44.65 per foot.
In the Downtown market, the vacancy rate rose modestly, by .2 points to 9.9 percent. The average asking rent fell by $0.28 per foot to $39.10 per square foot.
Ken McCarthy, senior economist and a senior managing director at the firm, said despite the gloomy global and national economic reports, he did not expect a double dip in New York City.
“We are in a slow period here for awhile,” he said.