The latest report from Cushman & Wakefield shows that new leasing activity, an indicator of market demand for available office space, rose 61.4% for the 12 month period ending in December 2010, compared to the previous year.
Leasing activity measured 26.3 million square feet for 2010 as a whole, compared to 16.3 million square feet for 2009. In the fourth quarter, new leasing activity totalled 7.5 million square feet, the second highest quarterly total in five years and the highest since the third quarter of 2006, when it registered 8.1 million square feet.
‘This is an incredible and heartening uptick in activity coming from the depths that the market touched 18 to- 4 months ago,’ said Joseph Harbert, Cushman & Wakefield’s chief operating officer for the New York Metro Region.
‘With limited new construction and modest improvements in employment in New York City, this leasing activity has produced the first clear signs that fundamentals are now on the mend,’ he added.
At the end of December, the average Manhattan office vacancy rate declined to 10.5% from 10.9% at the end of the third quarter, the largest quarterly decline since the second quarter of 2007. The market also experienced the first year on year office vacancy rate decline since the fourth quarter of 2007, and the first year of positive space absorption since 2007. At the end of March 2010, the Manhattan vacancy rate hit a five-year peak of 11.6%.
In the fourth quarter, all three submarkets of Manhattan, Midtown, Midtown South and Downtown, experienced significant declines in vacancy, with the largest on a percentage basis in Midtown South and Downtown.
Midtown’s vacancy rate declined to 10.6% at the end of December from 11% at the end of September. Midtown South’s vacancy rate declined to 8.6% from 9.2% in the same time period, which Harbert said positions it as a market in equilibrium, which the company classifies as a vacancy rate between 7 and 9% in Manhattan. In addition, Downtown’s vacancy rate declined to 11.5% from 12.1%.
The sublease vacancy rate, which represents space available directly from tenants with excess inventory, declined to 1.9% from 2% at the end of September and 2.7% a year ago. Sublease space now accounts for only 17.9% of all available office space in Manhattan, down from a peak of 28.2% in April 2009.
At the end of December, overall average asking rents in Manhattan registered $54.34, up from $53.80 at the end of the third quarter, their first quarterly rise since the third quarter of 2008. Average asking rents for class-A space rose to $61.96 from $60.69 at the end of the third quarter.
