NEW YORK CITY—With the local employment market showing noteworthy growth in the second quarter—jumping 1.9% year-over-year in May alone—the office market is continuing to thrive, according to a new report from Cassidy Turley.

The Manhattan office market posted its fifth consecutive quarter of positive absorption with an increase of 1.45 million square feet. That uptick brought the mid-year total to just under three million square feet. All of this success has put a squeeze on prospective tenants: the overall Manhattan availability rate dropped by 30 basis points to 10%, the lowest rate in 23 quarters.

Leasing stayed strong, with just over 17 million square feet transacted. Led by the 11 signed leases for space greater than 100,000 square feet this quarter alone, the total number of large leases signed was 27 by mid-year, on pace with the 58 completed in 2013. Demand for large blocks of space remains high as supply for these space options continue to disappear.

Asking rents continue to increase, rising by $1.07 per square foot for Class A space to $74.86 in the second quarter. Meanwhile, Class B asking rents jumped $2.25 to $57.24 per square foot after dropping in the first quarter. Despite the recent increase in demand Downtown, overall average asking rents remain $24.69 per square foot higher in Midtown, and $13.79 per square foot higher in Midtown South.

Following a flat first quarter, the Midtown office market fared well in the second quarter with 1.2 million square feet of positive absorption; creating a 40-basis-point-drop in availability to 10.4%.

Three leases for spaces greater than 350,000 square feet were signed in the second quarter, bringing the year-to-date total to five, which was the submarket's total number of agreements signed for all of 2013. These large leases helped leasing activity reach over 9 million square feet so far for the year Class A asking rents increased, but just by $0.13 per square foot, to $82.24 in the second quarter.

While Midtown South remains the tightest submarket in the nation, the availability rate increased 90 basis points in the second quarter to 8.4%. And the rise in available supply did not hurt rental growth as Class A and B asking rents soared.

Class A asking rents are up $2.51 per square foot this quarter, to $75.01, while Class B asking rents jumped $3.52 to $64.40 per square foot.

Lower Manhattan—in spite of surging demand—continued to serve as a value play, the report states. Overall average asking rents remain $24.69 per square foot higher in Midtown, and $13.79 per square foot higher in Midtown South.

The availability rate dropped 120 basis points in the second quarter, to 10.9%, while almost 1.1 million square feet of positive absorption was recorded in the second quarter.

Class A asking rents dipped slightly in the second quarter, down $0.14 per square foot to $55.22. Class B space remains a value-option for tenants. At $40.84, Class B asking rents are up $2.66 per square foot since the first quarter.