New York Market Overview
- Total Manhattan Class A Office vacancies increased from 8.7 % vacant to 8.8 % vacant
- Total New York City Office vacancy increased from 7.8 % vacant to 8.0 % vacant
The amount of sublet space on the market fell in February for the fourth month in a row. There was 15.2 million square feet of sublet space available, mostly from financial companies that are shrinking within their Class A office buildings, down 11 percent from the 17.1 million square feet on the market in October. Sublet space tends to be cheaper than typical lease space, and has played a large role in depressing office rents across the city.
Midtown South had robust leasing activity in February, with 410,000 square feet leased, a 46 % more leased space than the five-year monthly average. And while the average rent per square foot in the area stayed relatively flat, climbing just 5 cents month-over-month, the overage leasing volume had a positive effect on the area's office market. Downtown was not so encouraging. The neighborhood saw just 210,000 square feet of leased space, down 46 percent from the five-year monthly average of 390,000 square feet. Midtown had a stable month in February, falling short of the monthly average by about 29 percent but showed strong gains over the same time period a year earlier.
Landlords Downtown have increased their spending on tenant improvements and free rent in recent months. Landlords are spending on average $66 per square foot on making improvements to tenant space Downtown, and giving an average of 10 months of free rent. The free rent levels are the highest of any of the three Manhattan markets since the leasing market began to weaken in mid-2008 and the tenant improvement figure matches the previous high from last year. At the same time, average asking rents rising Downtown, as well as in Midtown South, but falling in Midtown. For February, average asking rents Downtown rose by 57 cents per square foot to $38.92 per foot; they rose by 5 cents per foot in Midtown South to $41.71 per foot. But in Midtown, the average asking rent fell by 32 cents to $55.75 per square foot.
A report indicates the Manhattan office sales market is on its way up and shows across-the-board improvements in office investment sales through the end of the year. The report shows that sales volume dropped 91 percent between 2008 and 2009. Investor attitude is changing for the better as Investors believe that rents are stabilizing. Average asking rent of $48.78 per square foot is widely thought of as the market bottom, from July 2008's peak of $71.92 per square foot. "By year-end 2010, forecasts that average New York City metro office rents will increase by 2.2 percent compared to year-end 2009.