Manhattan Vacancy Rate Is at Lowest Level in Three Years

NEW YORK CITY-Last year, Ken Krasnow, executive managing director at Cushman & Wakefield, characterized the real estate market here as “confident and stable.” This year, he called it “a market in fifth gear.” The firm’s year-end statistics for Manhattan show 29 million sf of office space was leased in 2004, nine million sf more than was leased the previous year. The overall vacancy rate of 11.1% is the lowest level in nearly three years.

Financial services firms lead the way, accounting for 25% of transactions last year. “It’s all financial all the time,” Krasnow said, adding that many companies including the Bank of Scotland are “poised to make major commitments.” Financial services firms accounted for approximately 1.5 million sf in the fourth quarter and for a total of 4.1 million sf in the year. Law firms were the second most active industry with 2.7 million sf leased.

And Midtown is the hot market, accounting for approximately 67% of all transactions. Overall average rents fell to their lowest price in five years, averaging $39.47 per sf. Of note is a nearly $15 difference in average asking rents between Midtown and Downtown over the past three quarters. Krasnow said this is the widest margin in at least two decades. He anticipates the Downtown market will heat up as there is continued competition for large blocks—250,000 sf–of class A space in Midtown.