NEW YORK CITY—DTZ says it is not surprised to see negative absorption in Manhattan for the first quarter of 2015, calling it a familiar trend during the ongoing recovery, which has repeated itself for the last three years.
The strength of the market, however, has led to positive absorption by the end of each of those years, which will likely be the case in 2015 as well. The negative absorption can mostly be attributed to 33 buildings adding more than 45,000 square feet to the market, which led to a 50-basis-point-jump in the availability rate to 9.8%.
For the quarter, 1.7 million square feet of negative absorption was posted. In the first tree months of the year. The bulk of the increase in supply was in the class B market, as it accounted for 15 of the 33 buildings each with greater than 45,000 square feet added to the market and totaled over 1.2 million square feet of negative absorption.
DTZ says the New York City economy remains robust at the start of 2015, as total employment continued to surpass all-time high employment numbers with over 4.1 million jobs in the city through February 2015. Office-using employment continued to grow as well, with 38,600 office jobs created in the past year. Year-over-year unemployment numbers are strong as well, as the New York City rate is down 130 basis points to 7.2 percent through February. With no signs of the economic expansion slowing, the Manhattan office market should remain strong through 2015.
The class A availability rate rose only 30 basis points to 10.3 percent, and accounted for 17 of the 33 buildings that added more than 45,000 square feet to the market. Class A asking rents dipped slightly in the first quarter, down 1.0 percent to $76.51 per square foot. The decrease in rent is not due to the market weakening, but was caused mostly from a significant block of space hitting the market Downtown at a lower price than both the Manhattan average and Midtown South's high-end space.
Other Economic Indicators
Midtown
The Midtown market started the year off slow, as the availability rate increased 20 basis points to 9.9 % in the first quarter.
Midtown Class A asking rents rose minimally, up only $0.24 per square foot to $84.98.
Park Avenue was the only submarket to post a significant class A rental increase in the first quarter, up $1.91 to $98.89 per square foot.
Class B asking rents actually dropped $0.26 per square foot to $61.09, as five significant blocks of space hit the market priced below the Midtown Class B average.
Midtown South
Midtown South was the only market to post positive absorption and start off 2015 right where 2014 ended.
Availability dropped 40 basis points to 6.6%, as over 339,000 square feet of positive absorption was recorded.
Downtown
After a phenomenal year in 2014, Downtown slowed through the first quarter 2015, as eight buildings brought a total of 2.1 million square feet to the market.
The biggest space to hit the market with over 984,000 square feet was 28 Liberty Street, which contributed to the 220-basis-point-increase in availability to 12.6 percent.
Demand slowed in the first quarter with only one lease greater than 100,000 square feet signed, as WeWork leased 240,000 square feet at 85 Broad Street.
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David Phillips
David Phillips is a Chicago-based freelance writer and consultant with more than 20 years experience in business and community news. He also has extensive reporting experience in the food manufacturing industry for national trade publications.
