Midtown South office availability hits lowest level since 2001

Thriving market has grown 25% in square footage in that time

Midtown South NYC
Midtown South leasing activity (credit: CBRE)

Despite a drop in leasing activity from last year, the Midtown South office market continued to be the tightest in the city during the third quarter. The availability rate of 7.9 percent pushed average asking rents up to nearly $71 per square foot, according to CBRE’s latest market report.

Midtown South leasing activity totaled 1.5 million square feet in the third quarter, down 16 percent from the same period last year but 13 percent above the five-year average for the quarter. The latter is “indicative of the strong demand for office space that has defined the market since early 2010,” the report said.

While year-to-date leasing activity of 4.5 million square feet dropped 12 percent from the first three quarters of 2014, availability in the supply-constrained market fell to 7.9 percent, its lowest level since 2001. The Midtown South office market has grown roughly 25 percent in square footage since that that previous low, however, further indicating the demand for space in the district.

Average asking rents of $70.59 per square foot were up by 6 percent year-over-year, the report said, and made the third quarter the first on record to see Midtown South rents top $70 per square foot for the entire period.

A few blocks north, the Midtown office market saw leasing activity total 3.6 million square feet in the third quarter – down 9 percent below the five-year average for the period and a 34 percent decline from a highly active second quarter that saw several major leases signed.

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But year-to-date leasing activity of 13.7 million represented an 8 percent jump from the first nine months of last year, while the availability rate of 10.5 percent was the lowest since late 2008, according to the report.

Average asking rents of $77.89 per square foot were up by 4 percent from the third quarter last year, with rents “broadly on par with those recorded in 2007” and about 10 percent shy of their record-high peak in 2008.

After getting off to a slow start, the Downtown office market saw leasing jump 60 percent from the previous quarter to 1.38 million square feet. Downtown leasing in the period was 5 percent above the five-year quarterly average, but still constituted a 15 percent decrease from the third quarter of 2014 – which, CBRE noted, was “one of the most active years Downtown since 2006.”

Year-to-date leasing Downtown totaled 3.39 million square feet through September, down 34 percent from the first nine months of last year. But the availability rate of 11.9 percent represented a downward trend from a two-year average of 12.8 percent.

Average asking rents dropped marginally from the second quarter, meanwhile, to $56.68 per square foot, but were still up 12 percent from the third quarter of last year. It is also the first time “on record” that average asking rents in Downtown remained above $50 per square foot for over a year, CBRE said.