NEW YORK CITY—During the first quarter of 2015, the Manhattan office market experienced a vacancy freeze, as several large blocks came onto the market and halted the decline that had become the norm over the past 18 months, according to a new report by Avison Young obtained EXCLUSIVELY by GlobeSt.com.
“New York City vacancy experienced a freeze due to several big blocks coming onto the market, but this space will continue to be absorbed as job growth drives office expansion in the coming months,” comments A. Mitti Liebersohn, Avison Young principal and New York City president.
New York City's year-over-year private sector growth rate of over 3% was higher than that of both the state, which was over 2% and the nation's rate of nearly 3%. The city's unemployment rate was 6.6 percent in February, up slightly from January, but down 1.3 percentage points compared to last February.
“On the employment front, the city's year-over-year picture was exceptionally positive, with every sector except manufacturing adding jobs for 12 months in a row through February 2015,” says Avison Young principal Michael Gottlieb. “We saw the most significant job growth in education and health services, which each posted a 4.9 percent increase.”
Of the 10 largest office leases in Manhattan during the quarter, companies in the financial services and TAMI sectors signed six. Financial services, accounting for 28 percent of the borough's leasing transactions, slightly edged out TAMI during the quarter.
In Midtown, landlords have increased asking rents by nearly 5%, to $73.90 per square foot, over last year. Posting more than five million square feet in transactions, Midtown continued to experience strong leasing activity during the quarter, with the Park Avenue submarket accounting for more than 1.5 million square feet in transactions, including four of Midtown's top 10 lease transactions.
Midtown's Class A vacancy rate increased 70 basis points, to 11.2 percent, from year-end 2014. Similar to this time last year, large blocks of space came on the market during the first quarter, causing a spike in vacancy.
The largest lease this quarter was inked by MetLife, which announced that it would consolidate its offices into nearly 550,000 sf at its namesake building at 200 Park Ave.
As the only submarket to post a decline in vacancy in the first quarter, Midtown South's overall vacancy rate dropped 20 basis points, while the Class A vacancy rate remained at a tight 6%. The Hudson Square/Tribeca and Madison Square /Park Avenue South submarkets both experienced a drop in overall vacancy rate of 90 basis points. Madison Square/Park Avenue South's Class A market decreased by 580 basis points, to 2.2 percent, from this time last year.
Throughout Midtown South, more than one million square feet of leasing activity was recorded during the first quarter. This was lower than first quarter 2014; however, larger leases signed by companies such as Sony and Credit Suisse combined for more than 1.6 million sf alone. Although rumors persist that TAMI tenants are starting to be priced out of the area, the sector continued to dominate Midtown South.
With a year-over-year increase of more than 5%, to $60.03 per square foot, Midtown South's asking rents accelerated faster than rents in Midtown.
Meanwhile, Downtown started the year with an abundance of space on the market, causing a surge of negative absorption and an overall vacancy rate jump to just over 12%. Adding to the availability increase was the former One Chase Manhattan Plaza (now 28 Liberty Street), which has 984,116 square feet on the market. At 195 Broadway, 457,000 square feet came on the market, and NYMEX gave back 319,644 square feet at 1 North End Ave.
Downtown Class A rates increased 12% from a year ago, finishing the quarter at $60.17 per square foot.
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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.
