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Manhattan office property market strengthening, data shows

It reveals that a total of 17.6 million square feet of new leases were signed in the first six months of 2011, the highest six month total in more than a decade. In May and June alone, new leasing activity totalled nearly eight million square feet, the highest two month total in Cushman & Wakefield's records.
It also shows that year on year leasing activity is up 40% from the 12.6 million square feet signed in the first half of 2010.
Strong leasing activity helped lower the overall average vacancy rate for Manhattan to 9.4% at the mid year point of 2011, a decrease of 0.5% from a month ago, marking the largest one month decrease since December 2005.

Year on year the overall vacancy rate declined 1.4% from the middle of 2010. The vacancy rate for class A space declined steadily to 10% at the end of the second quarter of 2011, down from 10.7% at the end of the first quarter and down from11.5% at this time a year ago.

Overall asking rents in Manhattan registered $55.52 per square foot, up $1.21 or 2.2% from $54.31 per square foot at the same time last year. The average asking rent for Class A space also rose, registering $63.58 per square foot, up $1.62 or 2.6% from $61.96 per square foot at the end of 2010.

‘The strong second quarter coupled with a record pace of leasing activity in the first six months of the year is proof of a rapidly strengthening market,’ said Joseph Harbert, Cushman & Wakefield's chief operating officer for the New York Metro Region.

Vacant space in Manhattan fell more than 4.4 million square feet since the end of 2010, to 36.7 million square feet. The report says that a lack of sublease space added to the market was a key contributing factor to the declining vacancy rate. Sublease space, which has decreased the past seven months and now totals 5.3 million square feet, accounts for only 14.4% of all available space in Manhattan, down from 21.9% a year ago.

The Midtown market continued to lead the way in activity, with 6.1 million square feet of new leases in the second quarter. Eight transactions of 100,000 square feet or larger closed in Midtown during the second quarter, up from seven transactions in the first quarter.

The Midtown Class-A market, which was hit the hardest during the recession, has recovered the fastest. The Class-A vacancy rate, which peaked at 13.9% in the first quarter of 2010, decreased to 10.5% in the second quarter of 2011.

‘The New York City economy continues to outperform the rest of the nation and that trend is showing up in the commercial real estate fundamentals. We anticipate that national employment growth will pick up its pace from what was a slow second quarter, which will cause New York to experience further increases in demand for space,’ said Harbert.

By industry, financial services accounted for 28.2% of all leasing year to date, followed by information/media at 27.5% and government, education and social services at 11.8%. This compares to the first half of 2010, when financial services accounted for 22.6%, followed by legal services at 12.1% and government, education and social services at 11.9%.