12/02/08

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Summery office news for the start of autumn

Source: Colliers ABR

The tale of Manhattan's commercial market has been full of happy chapters the last several months. A strong local economy, low unemployment, and steady demand have spurred heavy leasing activity and rising asking rents, tilting the market toward landlords and providing commercial brokers with a steady stream of work.

August in Manhattan was no different.

Take the Plaza District, for example. The average asking rent in that swath of coveted commercial blocks reached an all-time high, according to Colliers ABR, of $81.33 a square foot. That's up from nearly $80 in July and less than $70 in August 2005. The district had a vacancy rate of 5.7 percent in August, well below the overall Manhattan vacancy rate of 8.3 percent.

Other choice areas of the Manhattan commercial market have enjoyed a strong summer -- for landlords. You didn't have to be a tenant at a marquee address like 9 West 57th Street or the GM Building to see you rent ratcheted upward.

David Hopkins, a senior managing director at the Lansco Corporation, a firm with a portfolio that includes 1 Rockefeller Plaza at West 48th Street, says rents in the tower are now around $65 to $70 a foot. At 375 Park Avenue, space is as high as $150 a foot, he added, nearly twice the average Manhattan asking rent of $60.22 a foot in August. That average was up 2.8 percent from July, Colliers ABR reported.

One of Hopkins' clients has been looking for about 8,000 square feet on Park Avenue in Midtown since April, without success. "They can't find anything under $100," Hopkins said in early September. "They want to be on Park Avenue, but I don't know if they're going to wind up there or not."


Midtown
Major leases eluded Midtown in August, and that's not surprising. Relatively little space is available. The vacancy rate for Midtown in August was 7.1 percent, virtually unchanged from July and down from nearly 10 percent last summer, Colliers ABR reported.

The vacancy rate for Class A space, the top space in Midtown, also stayed nearly unchanged from July through August at 6.1 percent. This tightness helped drive the average Class A asking rent in Midtown up by $1 from July through August to $70.32 a foot; the overall Midtown asking rent also increased by just over $1 month over month to $57.11 a foot. At the start of the summer, the submarket's average asking rent was nearly $2 cheaper, according to Colliers ABR.


Midtown South
Asking rents in Midtown South followed a similar trajectory in August. The average increased 63 cents from July through August to $36.33 a foot; it was at $35.51 at the start of the summer.

For Class B space, which dominates the submarket, the average asking rent was $37.38 a foot in August, a slight increase from July.

The vacancy rate for Class B space increased slightly month over month from 10.2 percent to 10.6 percent. The overall vacancy rate also went up slightly from July to August as major leases, like with Midtown, skipped Midtown South toward summer's end. The overall vacancy rate was 8.5 percent, up from 8.3 percent in July.


Downtown
Downtown got the most attention in August because of the five-year anniversary of September 11. Analysts couldn't resist noting that the submarket, at least according to the numbers, has largely recovered commercially from the terrorist attacks.

The average asking rent for space there in August 2001, for instance, was $39.82, according to Colliers ABR. In August 2006, it was $38.78 a square foot, up from $38.12 in July. The asking rent for Class A space in Downtown was $45.29 a foot five Augusts ago; this past one it was $45.25.

Downtown also saw the biggest leases in August. Management services firm Aon leased 225,000 square feet at 199 Water Street, and Willis Group, also, a management consultancy, leased 205,000 feet in One World Financial Center. These leases helped lower the submarket's vacancy rate from 11.9 percent in July to 11.4 percent in August.