NEW YORK CITY-The city’s three major submarkets have seen steady leasing activity year-to-date, but it’s becoming unlikely that 2012 will surpass last year’s numbers in terms of total square footage leased, brokers from Colliers International explained at a third quarter press briefing on Thursday afternoon.
While the quarter showcased stable leasing volume, steady overall availability rates and increased asking rents, Manhattan overall has seen 18.4 square feet of leasing year-to-date, needing roughly nine million square feet of new deals to meet 2011’s total of 27.9 million, said Joe Harbert, president of the Eastern region at Colliers. And his staff agreed.
“Do any of my brokers in room think we are going to get to nine million by the fourth quarter?” he asked, and the majority of the brokers in the room shook their heads ‘no,’ a sign that Q4 will wrap up quietly. Harbert originally predicted earlier in the year that Manhattan would see between 23 to 24 million square feet of leasing activity by the end of 2012.
And the market is on pace to achieve that. In Q3, Manhattan overall – including Midtown, Midtown South and Downtown – saw 5,969,877 square feet of leasing, which is par for the course compared to same time in 2011 (5,962,542). Out of that 5.9 million, new leases made up 80% of the activity during the quarter, while the remaining 20% were renewals. This marks a big change from the second quarter of the year, where renewals made up 49% of the market – mainly driven by massive re-ups by Viacom at 1515 Broadway and Morgan Stanley at One New York Plaza in Lower Manhattan. “There was substantial renewal activity going on, but there’s been a little bit of a fallout,” Harbert said, later adding: “Relatively speaking, in the third quarter, there have been fewer renewals.”
Throughout the quarter, legal services have made a comeback, making up the most leasing activity (17.6%), followed by financial services (13.9%) – a strong number despite the fiscal cliff and growing economic uncertainty. However, Harbert said a notable drop off was the government sector, making up only 0.2% of all activity in the market, which is most likely due to local, state and federal budget cutbacks.
By submarket, Midtown clocked in at 3.5 million square feet and average asking rents of $67.28 in Q3, while Midtown South, despite a tapering off in the Penn Plaza District, stayed strong at 1.27 million square feet and rents of $46.90 per square foot; and Downtown at 1.5 million square feet and average asks of $45.61, with the bulk of activity in the Financial District.
According to Colliers data, the Manhattan availability rate is 11.5%, compared to the overall vacancy rate of 5.9% “If you are a client and looking for space, you are probably concerned about what’s vacant than available, so this is what we are looking at as immediate inventory,” Harbert said.
Average asking rents citywide have stayed steady at $56.14—and Harbert noted that landlords are optimistic going forward. Given things have been improving more rapidly than they have, so I think landlords are being very realistic at this point,” he said.
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