NEW YORK CITY—The city's commercial real estate market is sosolid right now, there's room to grow in rents and absorption inall three submarkets. This is among the findings in Cushman &Wakefield's mid-year report, revealed Wednesday during a pressbriefing in Midtown.

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New leasing activity thus far in 2014 has reached 16.7 millionsquare feet, an increase of 35% year-over-year, the report states.The mid-year total follows a first quarter total of 9.4 millionsquare feet, the highest first quarter leasing level ever recordedby the firm.

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“The start of 2014 is as robust as was the end of 2013,” saidRon Lo Russo, president, New York tri-state region. Large deals aredriving the market,” he notes. “These large transactionscontributed to the nearly 5.1 million square feet of year-to-datepositive overall absorption in Manhattan. That's nearly a 240%increase over last year's total of negative 3.6 million square feetfor the full year.

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That tremendous level of activity is fueling some big shifts,added Bruce Mosler, chairman of global brokerage. “The epicenter ofManhattan is moving West, South, and even Downtown. Users want tobe in the new product because it's exciting. That means HudsonYards, Manhattan West in Midtown South, as well as Downtown, whereyou will hear about significant commitments before year's end.”

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But Midtown will claim its portion of the pie too, he continued.“Midtown will remain steady. Buildings there that re-invest will dowell because the technology, advertising, media and informationsector,” which is driving activity, “ is all about creating alive/work/play environment.”

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Overall, Mosler predicted, “for the year 2013 to 2014, 2.5million square feet will be delivered and it will be absorbed.Through 2020, that number will get to 14 million square feet. Thisis the first time in decades that we'll see speculative developmentand I'm optimistic about it.”

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This strong climate is driving asking rents up in LowerManhattan, declared Gus Field, vice chairman. “The $30 dealDowntown is dead. The norm now is low-to-mid-$40s, and rents areclimbing to $50s in some spots.”

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The Midtown South market has held onto its status as thenation's tightest submarket for 26 consecutive quarters, and thatshows no sign of abating he says. The average asking rent increased1.2% to $60.17 per square foot. There has been a total of 3.7million square feet of new leasing activity through the first sixmonths of the year, which is an increase of 30% year-over-year.

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Downtown too had an increase of 3.7 million square feet of newleasing activity year-over-year. Through the first six months ofthe year, 42% of all new leasing activity involved relocations fromanother Manhattan office market. A total of 28 such transactionswere completed, totaling 1.6 million square feet. Last year, 1.7million square feet of transactions were completed for the fullyear.

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The average asking rent increased more than 7% year-over-year to$49.21 per square foot, representing the most significant increaseof the three major Manhattan submarkets.

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Retail also is faring well. Said Gene Spiegelman, vice chairman,“retail is the platinum investment of 2014. Demand is outstrippingsupply.”

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Of the Downtown market, he said, “Brookfield Place, the WorldTrade Center and even South Street Seaport are greataccomplishments and they're going to influence people for years tocome. And there are major untouched projects, like WaterStreet.”

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“Downtown will be rounded out from river to river,” hepredicted. “And the growth in asking rents over the next five yearswill be significant. But this is a going to be a big year overall.On Madison and Fifth avenues, and in Times Square, there are bigdeals chasing that real estate.”

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International investors are driving investor sales, assertedJanice Stanton, senior managing director, capital markets.“International real estate appetite is driving record breakingcapital flows, and those buyers are driving pricing in 100% ofdeals.

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Manhattan office sales are at an all time high on a price persquare foot basis, with Midtown class A pricing at nearly $1,300per square foot, she added. “Everyone investing in the US isinvesting in New York.”

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Rayna Katz

Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.