The nation’s largest office market continued to strengthen during the third quarter. Manhattan office vacancy measured 9.6% at the end of September, which represents a .2% decline since midyear, according to commercial real estate brokerage Cushman & Wakefield. Rental rates also improved with average asking rents hitting more than $41 per sq. ft. from $40.80 at midyear.
“Companies in the market for large blocks of high quality office space in New York may soon need to consider their options in lower Manhattan,” says Ken Krasnow, executive managing director and head of Cushman’s New York office.
They may not have a choice. Krasnow says that large blocks of midtown office space were in great demand in the third quarter, and he expects several large leases to close in the fourth quarter. “As those transactions come to fruition, we expect midtown vacancy rates to continually drop in the coming months and effective rents to increase,” he adds.
Lower Manhattan’s office vacancy rate dropped to 11.5% at the end of September, down .5% from mid-year. Unlike midtown, however, lower Manhattan’s average asking rents continued to decline between mid-year and the end of September: Cushman data shows asking rents slipping from $31.20 to $31.09 per sq. ft. over that period.
Financial services and legal firms continued to drive the leasing markets in the third quarter. High quality office space fueled the greatest demand as shown by Citigroup’s 270,311 sq. ft. lease at 787 Seventh Ave. and Time, Inc.’s 73,945 sq. ft. lease at 135 West 50th St.
Aside from the leasing market, Manhattan’s investment sales market also remains strong. Cushman data shows that nearly $19 billion in commercial properties were traded or under contract at the end of September.