NEW YORK CITY—The Manhattan office market experienced an exceptionally strong third quarter, according to new research from Colliers International. Leasing activity came in at 8.3 million square feet, 4.2% higher than the eight million square feet last quarter and 31.3% more than the 6.3 million square feet a year ago. Year-to-date leasing of 28.1 million square feet is a 35% increase over the 20.8 million square feet from the first nine months of 2013.
The overall average asking rent increased to $65.97 per square foot, up 2.3% from $64.46 per square foot last quarter and 10% higher than the $59.98 per square foot price reached a year ago.
Midtown recorded 3.3 million square feet of leasing activity, down 17.5% from four million square feet last quarter but better than the 3.1 million square feet leased in a year ago. Year-to-date leasing of 11.9 million square feet is 9.8 % greater than the 10.8 million square feet recorded during the first nine months of 2013.
Representing the sixth consecutive quarter of increases, Midtown average asking rent reached $75.74 per square foot, a 2% rise from $74.29 per square foot last quarter, and a 9.7% spike year-over-year. Average asking rents are now at their highest quarterly average since they reached $85.76 per square foot in the fourth quarter of 2008.
Recently renovated or repositioned buildings continue to attract tenants in Midtown South, with TAMI sector companies continuing to lead the market. Overall leasing reached 2.9 million square feet this quarter, up 48% over the 2 million square feet achieved both last quarter and a year ago. Midtown South registered 9.8 million square feet of leasing since January, 57.6% higher than year-over-year levels.
Marking the 15th consecutive quarter of increases in average asking rent, Midtown South reached $58.19 per square foot, up 3% from $56.47 per square foot last quarter and up more than 9% from the $53.23 per square foot price achieved a year ago.
The Downtown submarket continues to attract new tenants from various industries, registering 2.1 million square feet of leasing in the third quarter. That's nearly a 5% increase from 2 million in Q2 and up 70% from the 1.2 million square feet leased a year ago. Year-to-date leasing of 6.5 million square feet is 71% higher than the 3.8 million square feet from the comparable period in 2013, represents the highest level of leasing activity recorded Downtown since the first nine months of 2000.
Average asking rents continue rising Downtown as landlords are encouraged by sustained leasing activity, new office and retail construction, transportation infrastructure improvements and a growing residential population.
Upward re-pricing by landlords and the removal of lower-priced blocks of space drove average asking rents to $51.70 per square foot, up 5.6% from $48.96 per square foot last quarter, and up 8.9% from $47.48 per square foot a year ago. Even more significantly, these asking rents are the highest ever recorded Downtown.
“The Manhattan office market is experiencing across-the-board gains in most of the key fundamentals, in some cases even surpassing pre-recession peak performances,” says Joseph Harbert, president of the eastern Region for Colliers. “We are on pace for a stellar 2014, with Midtown South and Downtown continuing to lead the way, and an increasing impact of future deliveries coming along the Far West Side.”
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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.
