Midtown office vacancies drop to lowest level since 2008

“It’s gonna be an OK year,” says Cassidy Turley exec

Peter Hennessy of Cassidy Turley
Peter Hennessy

In a reversal from last year, Midtown office leasing continues to improve, while the market to its immediate south continues to see vacancy rise, a market report released today by commercial brokerage Cassidy Turley shows.

Vacancy in Midtown in November fell to 10.8 percent, down from 11.1 percent in the same month last year — the lowest rate Cassidy Turley has recorded since 2008. Average asking rents were $72 per square foot in Midtown, up 11.6 percent from $64.50 in the same period last year.

The Rockefeller Center/Sixth Avenue submarket saw the healthiest leasing, in a turnaround from this Spring, when the vacancy rate in that area hit 14.2 percent, the report shows. In November, vacancy was 11.9 percent, down from 12.5 year-over-year, while asking rents were an average of $77.98, up 2.4 percent from $76.08.

“Year-to-date absorption has been the best we’ve seen in the entire Midtown market,” in the Rockefeller Center/Sixth Avenue area, Peter Hennessy, president of the tri-state region at Cassidy Turley, told The Real Deal. “I think there was pent up demand,” as a result of many leases expiring at once, he said.

Meanwhile, in Midtown South, vacancy grew slightly, to 9.3 from 9.2 percent last month and 7.9 percent last year at this time. Some of the increase was due to more than 130,000 square feet of newly revamped space that just hit the market at 79 Madison Avenue, as The Real Deal reported, and the sudden appearance of the approximately 750,000-square-foot F.M. Ring portfolio, much of which sits in Midtown South, on the market, Hennessy said.

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Average rents overall in Midtown South rose, however, from $48.73 per square foot last November to $61.91 now – a 27 percent jump.

The stand out submarket in Midtown South was Tribeca/Hudson Square, where vacancy plummeted from 12.4 percent earlier this year to 7.8 percent in November, the report says, and average rents were $62.16, dramatically up from $ 47.20 last November.

“There is huge activity in that marketplace and it will continue,” Hennessy said, adding that interest in the area is largely from creative industries like “media, the arts, publishing and film.”

Downtown, average asking rents rose as 4 World Trade Center’s pricey top floors officially hit the market, but vacancy remained at 13.3 percent — an increase from last year’s 10.4 percent, but a relatively minor fluctuation given that an estimated 2.5 million square feet of vacant space has been added Downtown in recent months. That includes 4 World Trade and Prudential’s space at 1 New York Plaza (the insurer’s lease expires at the end of the year). The 330,000 square feet that law firm Jones Day leased at 250 Vesey did help ameliorate the additions, the report noted.

In Manhattan as a whole, the average asking rent jumped to $64.66 from $56.82 last year in November, and vacancy was 11 percent, up slightly from 10.4 percent.

“It’s gonna be an okay year,” said Hennessy. “Not a bad year, [but] not a great year.”