NEW YORK CITY-At midyear, Manhattan’s office leasing market for2010 is on pace to look more like 2007 or even 2005, CB RichardEllis and Cushman & Wakefield said earlier this week at mediabriefings. That comes after the two worst consecutive years of thepast decade. Separately, C&W on Thursday reported that theaverage vacancy rate in 31 CBDs across the US has declined for thefirst time since ’07.

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“The story for New York during the recession and recovery is howmuch better we’ve performed than the rest of the country,” said KenMcCarthy, C&W’s managing director of research for the New Yorkmetro region, at his company’s second-quarter briefing Wednesday.Since January of this year, the city has been adding office-usingjobs four times as rapidly as the US overall, he pointed out.

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Accordingly, year-to-date office leasing volume is up sharplyover the first half of 2009. C&W puts the YTD tally at 12.6million square feet; CBRE says it’s 11.7 million square feet. Byeither measure, though, volume is up nearly 100% over the first sixmonths of ‘09 and has a strong shot at climbing well over 20million square feet for the year.

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Matt Van Buren, executive managing director and head of CBRE’sMidtown office, noted that monthly leasing volume over the past 12months has been right in step with the five-year rolling average of1.86 million square feet. By contrast, 2008 and last year averagedabout 450,000 square feet below the monthly average.

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With deals ranging from law firm Proskauer Rose’s 406,000 squarefeet at SJP Properties’ new 11 Times Square to the New YorkLiquidation Bureau taking 116,540 square feet at Swig Equities’ 110William St., the number of transactions over 100,000 square feet isalso up sharply from ’09. Only eight of those 21 big deals wererenewals, suggesting that tenants are more willing to get out intothe market and explore their options, said Joseph Harbert, COO ofthe New York metro region, at C&W’s briefing.

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Added to which, Harbert said, “Despite this long, deeprecession, we never got as much sublet space as peopleanticipated.” Van Buren said at Thursday’s CBRE event thatabsorption has been “basically flat” YTD, while his colleague, EVPPeter Turchin, noted that sublease space in Midtown has declined by22.3% this year. “After the market gave back 23 million square feetduring the two-year downturn, it has stopped giving it back,” saidVan Buren.

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In fact, Turchin said, space is being withdrawn from the Midtownmarket at a rate we haven’t seen before. It’s already ahead of the2005 total of 4.3 million square feet; YTD the tally is 4.4 millionsquare feet.

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However, Midtown finished ’05 with an availability rate of 8.9%.Today, across Manhattan, “availability has been stubbornly stuck at14% for the past year,” said Van Buren. Helping maintain it at thatrate was an increase in Downtown’s availability from 12.4% in Mayto 15% in June, due to Goldman Sachs’ vacant1.1-million-square-foot berth at 85 Broad St. entering thetotals.

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Meanwhile, asking rents for the island overall increased inJune, if only by three cents from May’s average of $47.58. Turchinnoted that there’s been “tremendous price compression” among thetop-tier Midtown buildings, where asking rents in ‘08 were 60%above the average. Today, that price delta has shrunken to 17%.

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Over the course of Q2, Manhattan’s three submarkets saw vacancydeclines of anywhere from 0.01% in the case of Downtown to 1.04% inMidtown, C&W reported. These three submarkets and the otherCBDs tracked nationally by C&W saw a quarterly decline invacancy for the first time since Q4 ’07, dipping an average 0.23%to 14.8%.

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Sixteen of the 31 CBDs tracked by the firm saw quarterly vacancydeclines during Q2. That compares to nine of 31 markets, or 29%,during Q1. The largest quarter-over-quarter declines occurred inAtlanta, which declined to 21.5% from 23.2%; Fort Lauderdale, whichdeclined to 18.9% from 20.4%; Phoenix, which declined to 22% from23.4%; Oakland, CA, which dipped to 16.5% from 17.7%; andManhattan’s Midtown submarket, which declined to 11.5% from12.6%.

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“Markets throughout the US continue to strengthen, as it becomesstrongly apparent that the national vacancy rate for CBDs haspeaked,” says Maria Sicola, executive managing director and head ofAmericas research at C&W, in a release. “Increased leasingactivity has attributed to declines in vacancy.”

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.