Sublease Space Balloons; Office Sales Wither

NEW YORK CITY-Sublease space has come onto the Manhattan office market in quantities that haven’t been seen for years and is putting downward pressure on asking rents, according to several quarterly reports. However, forecasts call for less cloudy conditions as the economy begins to stabilize late this year and into 2010.

“The spread between asking rents and taking rents will start to narrow in the next few months,” said John Powers, chairman of the New York tri-state region for CB Richard Ellis, at the company’s quarterly media briefing on Wednesday. In the meantime, though, the availability rate will continue to increase, although Powers predicted it won’t hit the 1992 nationwide peak of 18.7%.

Currently, the overall vacancy rate for Manhattan is 8.5% as measured by CBRE, and reaching 9.6% if the space that will become available in the next months is taken into account, as Cushman & Wakefield does in its first-quarter report. Class A vacancy has reached 10.8% from 10.2% in February, according to the monthly snapshot released Tuesday by Colliers ABR. Midtown’s vacancy rate at 10.5% is noticeably higher than the 8.1% rates seen in both Midtown South and Downtown, according to C&W. “You could almost say this is a Midtown recession,” said C&W COO Joseph Harbert during the company’s media briefing on Tuesday.