At a media briefing Tuesday morning, C&W's Joseph Harbert said a key factor was job losses in the office-using employment sector. During the 2002 downturn, Manhattan's losses were greater than the national average. This time around, the city is doing no worse than the US as a whole.
Q1 office leasing activity across Manhattan shot up 84% year-over-year, according to C&W's quarterly report. However, the three-month total of 5.7 million square feet was strong not only by comparison to the dismal market of a year ago. It's also up 14% over Q4 2009, which was viewed as a strong quarter in and of itself, C&W says.
Harbert, COO for the New York metro region, noted that as the "white- collar recession" hit Midtown especially hard, so the submarket has been particularly resilient. Its Q1 total of nearly four million square feet in office leasing activity is above the six-year rolling average.
In common with other services firms that have issued reports recently, C&W notes that asking rents have stabilized. "We don't see precipitous declines going forward," Harbert said. That serves as a spur to tenants to make leasing commitments now while prices are still low.
"It's clear that we're off to a recovery, at least in Midtown," Harbert said. On the other hand, he pointed out that Midtown's vacancy rate is 12.6%, higher than the 11.9% peak seen in the last downturn. For class A space, the rate is even higher.
The figures are skewed upward, though, by a single office property that is now counted in the tallies: the 1.1-million-square-foot 11 Times Square, still under construction. Currently it's 100% vacant, but Harbert noted that "there are deals cooking over there."
Office vacancies in Midtown South and Downtown are similar: 9.9% and 10% at the end of Q1, respectively. However, their Q1 stories are different. Whereas Midtown South's leasing volume of 924,000 square feet was up 190% over a year ago, Downtown during the quarter was below average. Moreover, Midtown South's vacancy rate declined during Q1, while Downtown's ticked upward.
At a Massey Knakal media briefing this past January, chairman Robert Knakal said '09's $6.3-billion citywide total marked a quarter-century low point that wouldn't be repeated this year. Already in 2010, that prediction is coming true. C&W says the Q1 Manhattan tally of $3.3 billion for properties sold or under contract is nearly equivalent to the value of all property sold in Manhattan for the full year '09.
Helping the investment sales climate is greater liquidity. "The debt market is on its way back," said Steven Kohn, president and principal of Cushman & Wakefield Sonnenblick Goldman. However, Harbert pointed out, "There's still way more capital than product," an imbalance that should remain in force for the next six to 12 months.
Manhattan's retail sector also showed signs of renewed vitality in Q1. Only one of the seven retail submarkets tracked by C&W experienced a quarterly increase in availability, while average asking rents for ground floor space increased in five of the seven submarkets.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
