Layoffs loom, but for now Manhattan office market enjoys finance industry growth
Source: Grubb & Ellis
For the first time since Lehman Brothers’ collapse, the finance and insurance industries were the top contributors to Manhattan leasing activity in the third quarter, accounting for 27 percent of activity, and powered a strong market.
According to a third-quarter Manhattan office leasing market report released today by Grub & Ellis, 26.5 million square feet has been leased through the third quarter, putting the market well on pace to surpass the 29.8 million square feet of activity averaged over the last 14 years. Net absorption was 1.11 million square feet that quarter, thanks largely to the 859,000 square feet of Class A space signed for, and 4.46 million square feet year-to-date. East of Park Avenue in Midtown as well as Madison Square Park were the two areas responsible for more than 800,000 of the 1.11 million square feet leased.
The average asking rent for Class A office space was $79.23 per square foot in Midtown, $60.38 in Midtown South and $57.28 Downtown. The average asking rent for Class B space across the borough was $48.50.
With the absorption increases, the vacancy rate declined 0.4 percentage point this quarter to 9.2 percent, but Midtown experienced a slight 0.2 percentage point increase to 9.2 percent.
Another sign of trouble for Midtown, the report noted, is looming layoffs in the finance and insurance industries that keyed the third quarter growth. That could dampen the market moving forward, and especially Midtown where many firms in these industries are based.
On the bright side, the consistent growth in the information services sector, which includes social media and tech start-up firms, could fuel growth in the Midtown South and Downtown office markets that attract those tenant types. Overall, the report shows that 90 deals have been inked in Manhattan for more than 50,000 square feet this year, leaving about 153 blocks of that size on the market. — Adam Fusfeld