Optimal Spaces Blog

Manhattan leasing activity picks up for both Retail and Office.
Additional 500,000 RSF of office vacancies came on the market last month, but Tenants are snapping up office and retail spaces as rents are near a bottom and business prospects are more stable.

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Manhattan office and retail markets have a Pulse!! Tenants are getting substantially lower rents and more favorable lease terms as landlords reach to make deals.

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Activity has picked up in small and medium sized office and retail leases. Major corporations (Tenants) are still taking a wait and see attitude over the next few months until a clearer picture emerges on the economy before entering into long term leases. There still exists a large overhang of shadow office and retail space (space available but not listed as vacant), therefore there is a lot more vacant than the vacancy figures indicate.

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The lowest rents in 13 years have caused office and retail tenants to enter back into the market and execute leases.

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Manhattan commercial vacancy rate hits 13-year high.

While commercial leasing activity has picked up in the past few months, the city’s Class A vacancy rate increased and average rents fell last month. The vacancy rate of Class A space in Manhattan reached 11.9 % in May, up from 11.3 % in April.

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The New York City Office and Retail rental markets remains quiet though bargains abound. Great office space on Park Avenue that last year was $125-175 a square foot can now be rented for $60/SF asking. Same is true in retail where rental rates in many markets are 40-60% less than a year ago.

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Leasing activity grinds to a near halt. The Midtown Class A vacancy rate is 12.2 percent since April of this year, the highest rate since August 1996. There is 7.8 million square feet of sublease space available in Class A buildings, the most since they started keeping records in 1991.

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Office and retail leasing activities have dropped to new lows. Managing agents and landlords are now devoting a large percentage of their time working with existing tenants who are looking to downsize or renegotiate their rents. Last quarter, there was nearly 4 million square feet of negative absorption. Pending moves by Merrill Lynch and AIG, millions of additional feet of office space will be dumped back on the market.

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At a recent real estate conference last week, Vornado said that retail and high end office rents are having a negotiable factor of between 25 and 50% of asking prices.

In addition, SL Green said that office rents are projected to be down 25%. What this means to office and retail tenants is that there are deals/bargains to be had from motivated Landlords, provided that you are guided by an expert to help you get all these concessions.

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