NEW YORK CITY-Yet another third quarter report has come out, and this one is decidedly upbeat.
The Manhattan office market continued to gain momentum in the third quarter, “as all market indicators are heading in the right direction,” according to a new report from Cassidy Turley. Demand remains strong as another 1.3 million square feet of positive absorption was recorded in the third quarter, bringing the 2013 total to 1.9 million square feet.
A key reason for this surge, the report states, is the demand for big blocks of space. In the first quarter, there were 83 blocks of available contiguous space 100,000 square feet and greater, but an increase in activity has pulled that number down to 68. This has caused the availability rate to drop 20 basis points to 11.2%, its lowest level since 2008. Asking rents continue to rise however, with Class B rent increases continuing to outpace Class A. Class B average asking rents soared $2.50 per square foot, to $53.28, while Class A rents went up only $.68, to $69.97 per square foot.
Midtown saw a modest third quarter following its strong second quarter, with the availability rate down 20 basis points to 11.2%. The submarket has 41 large blocks of space—the bulk of the existing such inventory—but demand for these spaces over the last two quarters has dropped that total from 48. That demand increase led to another 393,426 square feet of positive absorption in the third quarter, bringing the 2013 absorption totals to just under 1.5 million square feet. Class A pricing dipped slightly, by $.35, to $77.21 per square foot.
However, Cassidy Turley calls this a statistical anomaly, rather than a sign of a weakening market. The increased leasing activity in the high-end market has pulled some of the higher asking rents out of the statistics, as more than 50 leases north of $100 per square foot have been signed this year.
Even with the addition of a new 400,000-square-foot building at 51 Astor Place to Midtown South's inventory, the availability rate remains below 9% in what continues to be one of the tightest submarkets in the nation. Despite this causing a third quarter rise in availability by 40 basis points to 8.7%, asking rents still soared.
Class A asking rents jumped $7.65 per square foot to $75.02. This average is slightly skewed by the pricing at 51 Astor Place as it is $30 per square foot higher than the market average. Removing 51 Astor Place from the statistics leaves the Class A Midtown South average at $68.78 per square foot.
Demand Downtown was solid in the third quarter, as the availability rate dropped 110 basis points to 13.5%, Cassidy Turley states. The 906,202 square feet of positive absorption posted in this quarter nearly wiped out the negative 1.05 million square feet from the second quarter. However, this statistical victory likely will be short-lived, as 4 World Trade Center is scheduled to finish construction next quarter, bringing 1 million square feet of available space to the market.
Asking rents Downtown remained stable in the third quarter, as Class A asking rents edged up only $.02 per square foot to $52.56. Downtown pricing is significantly discounted compared to Midtown and Midtown South and remains a value option, as 94 tenants moved south of Canal Street since January 2012.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
