NEW YORK CITY-Right at the close of the third quarter, Colliers International has issued a report on the city's performance over the last three months. According to the data, the Manhattan office market returned to a more normalized pace of activity in the third quarter, with overall indicators pointing to slow but steady improvements as year end approaches.

The leasing market's leaders were healthcare, technology, professional, and business services, all strengthened by an overall improving employment sector, although the pace of large lease and investment sales activity slowed over the past few months, Collier's notes.

The overall Manhattan availability rate dropped to 11.5%, down from 12.1% in the second quarter, its lowest level since late 2011. All three of Manhattan's markets participated in the decline.

In Midtown North, the overall availability rate declined to 11.6%, down from 12.3% in the second quarter and 12.6% in the first quarter. Midtown South came in at 9.1%, down slightly from 9.2% in the second quarter, while Downtown declined to 14.7%, down from 15.9 %.

Meanwhile, the overall Manhattan vacancy rate also declined, falling to 6.2%, down from 6.4% in the second quarter. However, Collier's notes, at 6.2% it is still modestly above the average of 6.0% recorded in 2012 and the first quarter of 2013.

In short, the overall Manhattan occupancy level for office space has increased during the last two quarters, and appears to be escaping from the doldrums recorded in the latter half of 2012 and the first quarter of 2013.

After remaining virtually unchanged over the past 18 months, the overall average asking rents improved, reaching $59.14 per square foot, up 4.5% from $56.61 per square foot in the second quarter. This strong gain largely resulted from substantial increases at buildings that have been newly re-introduced to the market after major upgrades, or have specialized uses or highly sought-after locations. Additionally, sublease space now only represents 15.2 percent of the total available space, compared with 15.6 percent in the previous quarter.

Average Midtown North asking rents reached $69.36 per square foot, up 4.9% from $66.09 per square foot in the second quarter. Rent gains occurred in all of New York City's major submarkets. Plaza District Class A space recorded an average asking rent of $77.59 per square foot, up 3.4% from the second quarter.

Gains were more modest in Midtown South, at 3%, and Downtown, at 2.8%, but on an annualized basis they were significant, reaching nearly 12%. Midtown South's average asking rent registered $53.08 per square foot, and Downtown's was $47.48 per square foot.

“After the second quarter's blow-out performance with 9.6 million square feet of completed transactions, it was widely expected that the pace of leasing would slow in the third quarter, which it did,” says Joseph Harbert, president of the eastern region for Colliers International. “However, at 6.3 million square feet, the level of leasing activity was well within the normal range. Moreover, there are indications that other large leases are very close to signing.”

On the investment sales front, the average third quarter sales price was $945 per square foot, when including the impending sales of 650 Madison Ave. and 200 Lafayette St. This brings the 2013 year-to-date average price to $911 per square foot, which is above the peak levels reached in the pre-recession years of 2007/08 when it ranged from $777 per square foot to $842 per square fot.

Total dollar volume of sales dropped to $2.3 billion, down 50% from $4.7 billion in the second quarter. However, close to $5.5 billion of transactions are under contract and likely to close before the end of 2013, Collier's reports.