August Manhattan Office Leasing Activity Down from July

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According to CBRE's "Manhattan Marketview Snapshots" for September, 2012, the performance of this office market is mostly down, but up slightly year-over year.

While the 1.87 million square feet of leasing during August was below July's tally of 2.61 million square feet, it was above the 1.53 million square feet of leasing recorded in August 2011. Still, year-to-date leasing, at 14.78 million square feet, remained below 2011's year-to-date total of 19.42 million square feet.

Although Manhattan recorded 210,000 square feet of positive net absorption during August, year-to-date absorption was a negative 2.21 million square feet. In contrast, net absorption levels for the same period in 2011 was a positive 5.27 million square feet. Manhattan's average asking rent remained stable at $56.11 per square foot and the overall availability (vacancy) rate went down 10 basis points to 10.9%, according to CBRE.

Among the recent highlights for Manhattan's leasing market is the 200,000 square foot lease for the international law firm of Chadbourne & Parke at 1301 Sixth Avenue. The deal was the largest lease transaction by a law firm in 2012, according to Real Estate Weekly, an online newsletter. Although the firm is relocating from a 300,000-square-foot space at 30 Rockefeller Center, that space is being taken over by the accounting firm Deloitte. Chadbourne considered moving to One World Trade Center, according to the newsletter.

According to a September 7th report by Reuters, The World Trade Center is being used as a bargaining chip: "Companies renegotiating their property leases in New York are seeking lower rents by playing the World Trade Center Card--threatening to move to the towers rising from the rubble of the 9/11 attacks."

The Reuters report says that banks, law firms, advertising and accounting firms are content to stay in Midtown, which is close to their clients and transportation links. Plus, Lower Manhattan has fewer amenities for office workers, such as shops and restaurants, and many firms and their workers worry that a new World Trade Center could again become a target for attacks.

According to the CBRE report, downtown leasing totaled 280,000 square feet in August, 13% below the five-year monthly average of 320,000 square feet. Year-to-date leasing at 2.99 million square feet was much lower than the 2011-year-to-date figure of 4.35 million square feet. There were 150,000-square- feet of negative absorption in August in downtown, and year-to-date absorption levels were also negative. The vacancy rate increased by 20 basis points to 10.4%. 

In Midtown, which had 1.26 million square feet of leasing during August, the submarket had its second consecutive month of above-average leasing, topping its five-year monthly average of 1.15 million square feet by 10%. Still, year-to-date leasing totaled 8.19 million square feet, 31% below the 11.81 million square feet recorded in the same period in 2011.

Midtown South, during August, had 330,000 square feet of leasing activity, matching its five-year monthly average. Year-to-date leasing was 3.60 million square feet, ahead of last year's total of 3.27 million square feet. For the month, however, net absorption was at a break-even level because leasing was offset set by several new vacancies, including 100,000 square feet at 401 Park Avenue South.