According to C&W's statistics, new leasing in the city has increased by more than six million sf compared to the same period a year ago. That strong leasing activity resulted in a decline in the overall office vacancy rate in Manhattan to 11.4%, its lowest quarterly rate in more than two years. For the nine-months ending Sept. 30, new leasing activity measured 20.9 million sf, compared to 14.9 million sf through the first nine months of 2003.
Larry Zuckerman, senior managing director for Grubb & Ellis agrees, but sees tenants taking more than 100,000 sf still having leverage with landlords. "It's true to an extent. It's a bit of an impact, but not drastic."
According to G&E figures, the third quarter was the first time in 18 quarters that the Manhattan availability rate dropped by over half a percent. Availability has not dropped more than that since 2000. According to Grubb statistics, preliminary leasing activity for the third quarter totaled 3.5 million with Midtown dominating the market with 64% of that activity.
The Downtown vacancy rate is at the lowest rate in more than a year, according to C&W. Krasnow said that the health of the market "defies expectations" and cited several factors that have buoyed the Downtown market: a significant reduction in sublease space; major companies and organizations have made big commitments and recommitments to large offices leases Downtown; and older offices being been converted to residential units.
On the horizon is 700,000 sf of leases waiting to be completed at 3 World Financial. Two of the leases, totaling nearly half of that space are expansions. Krasnow said interest in the under-construction 7 World Trade Center is growing.
And rental rates are going higher. At the end of the third quarter, rents in Midtown reached $47.04 per square foot, up from $45.63 a year ago, according to C&W. Financial services firms are leading the way leasing 2.6 million sf so far this year. Law firms have leased 2.2 million sf. Krasnow said he expects that trend to continue in the months ahead with financial services taking 6.8 million sf, law firms, at 3 million sf, and educational institutions on tap for 1.2 million sf.
The area's investment sales market at $10.3 billion has already surpassed the total value of transactions in all of 2003. According to Krasnow, a highly favorable interest rate environment continues to be an important factor, combined with a higher tolerance among investors for risk.
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