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Office: Still Strong Despite Rising Vacancy

Vacancy rates increase in nearly every Manhattan submarket, but prime spaces continue to command high prices in select areas.

By Natalie Dolce and Paul Bubny | Updated on July 15, 2008

The local office market continues to feel the impact of the turmoil affecting the global financial markets, and although brokerage firms see overall vacancy rates increase, the waters aren’t as gloomy as they could be. Richard Persichetti, manager of client services at Grubb & Ellis, tells Real Estate New York that direct average asking rents have declined, however he notes that “despite average asking rents beginning to trend downward, prime spaces continue to command high prices in select areas of Manhattan when compared to their respective submarket.”

As the industry knows, all brokerage firms gather their data differently, so statistics and findings will vary. CB Richard Ellis’ Q2 2008 report shows office rents rising slightly from May to June. Overall Manhattan asking rents rose from $71.35 per sf in June from $71.25 in May, compared to $63.46 per sf in June 2007. Availability rose to 9% in June from 8.9% the month before, and absorption improved to negative 0.25 million sf from negative 0.37 million sf.

June was a strong month for leasing activity, especially Downtown, with large leases such as American International Group’s sublease of 803,000 sf from Goldman Sachs at 180 Maiden Ln.; the New York School Construction Authority’s 140,000-sf lease at 26 Broadway; KPMG’s 118,000-sf expansion at 345 Park Ave.; and Enfatico’s 98,000-sf lease at 11 Madison Ave., among others. Overall leasing activity for June, including relocation as well as renewals, improved to 2.28 million sf from 1.69 million sf in May, but YTD activity at the end of June had declined by 1.5 million sf compared to the first half of ’07.

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