NEW YORK CITY—Despite strong leasing activity in the first quarter of the year, vacancy rates increased throughout Manhattan, according to a new report by JLL. The city witnessed negative absorption for the first time since the first quarter of 2014 as a number of large blocks of space were put back on the market.
Manhattan's overall vacancy rate rose to 10% this quarter, an increase of 5.3% from 9.5% at year-end 2014. New York's Class A vacancy rate rose to 11% in the first quarter of 2015, an increase of 4.8% from 10.5% the previous quarter.
“While this past year was noteworthy for the robust activity seen throughout Midtown South and Lower Manhattan, Midtown claimed most of the volume in the first quarter of the year,” says Tristan Ashby, director of New York research. “FIRE industries—finance, insurance and real estate—were ascendant in Midtown this quarter, with major commitments made by MetLife, Fiduciary Trust and Fortress Investments. The outlook for the financial services sector, which has historically been a key driver in terms of the city's Class A office leasing activity, has seen marked improvement.”
Overall average asking rents in New York rose to $66.74 per square foot this quarter, an increase of 2.3% from $65.25 per square foot at year-end 2014.
In Midtown, tenants within the city's FIRE sector fueled a significant rise in activity in the first quarter of 2015, accounting for 11 of the top 20 Midtown leases compared with just five of the top 20 during all of 2014. The submarket recorded eight large-block leases, those totalling 100,000 square feet or greater, in the first quarter compared with just five at the same time this past year.
However, Midtown's overall vacancy rate grew to 10% this quarter, an increase of 3.1 % from 9.7% at year-end 2014. Overall average asking rents rose to $71.60 per square foot this quarter, an increase of 1.8% from $70.31 per square foot at year-end 2014.
After benefitting from record leasing activity last year, Midtown South witnessed a slowing of activity in the first quarter of 2015. Just one lease in excess of 100,000 square feet was reported this quarter compared with four in the first quarter of 2014.
Midtown South's overall vacancy rate dropped to 6.1% this quarter, a decrease of 11.6 % from 6.9 % at year-end 2014. The submarket's overall vacancy rate fell 12.9% during the past 12 months from 7% in the first quarter of 2014. Average asking rental rates continued to grow in Midtown South, with the submarket's Class A rents eclipsing rates for similar Midtown buildings in the first quarter of 2014.
Overall average asking rents in Midtown South rose to $65.39 per square foot this quarter, an increase of 7.6% from $60.78 per square foot at year-end 2014. Year-over-year, the submarket's overall rates grew 12.3 % from $58.23 per square foot in the first quarter of 2014.
Like Midtown South, Lower Manhattan's office market saw a slowdown in deal volume in the first quarter. Downtown Class A vacancy rates rose as two large blocks of trophy-quality space at 28 Liberty Street and 300 Vesey St. were delivered to the market. WeWork signed the only large Downtown lease of the quarter, committing to 234,879 square feet at 85 Broad St.
Lower Manhattan's overall vacancy rate grew to 12.5% this quarter, an increase of 16.8% from 10.7% at year-end 2014.
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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.
