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Office:Vacancy Stays Low, Sublease Space Rises

Large blocks of space put back on the market may crimp Manhattan's still-low office vacancy rate

By Paul Bubny | Updated on May 16, 2008

The Manhattan office vacancy rate during Q1 2008 was the lowest of any major market, although the rate of increase in sublet space was higher than the national average. So says Grubb & Ellis in recently issued reports, while SL Green Realty sees the driver of that uptick in sublease space—turmoil in the financial services sector—as the catalyst for a softening in leasing activity.

While Manhattan’s vacancy rate of 4.9% was well below the quarterly national average of 13.6%, the island’s available space for sublease jumped to over seven million sf, which an increase of about one million sf from the end of 2007. The increase of approximately 16% compared to the 12% national average. “Most of this was from Downtown,” although iStar Financial put 107,000 sf at 1095 Ave. of the Americas back “after leasing it less than a year ago,” Richard Persichetti, client services manager with Grubb & Ellis’ New York office, tells Real Estate New York.

He adds, “There was more than just an addition of available sublease space in the first quarter. We also saw a drop-off in leasing activity,” a 15% decline compared to Q1 ’07. In addition, Persichetti says, 48% of the square footage leased in Q1 ’08 was in lease renewals.

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