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

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

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Leasing stayed strong, with just over 17 million square feettransacted. Led by the 11 signed leases for space greater than100,000 square feet this quarter alone, the total number of largeleases signed was 27 by mid-year, on pace with the 58 completed in2013. Demand for large blocks of space remains high as supply forthese space options continue to disappear.

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Asking rents continue to increase, rising by $1.07 per squarefoot 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 afterdropping in the first quarter. Despite the recent increase indemand Downtown, overall average asking rents remain $24.69 persquare foot higher in Midtown, and $13.79 per square foot higher inMidtown South.

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Following a flat first quarter, the Midtown office market faredwell in the second quarter with 1.2 million square feet of positiveabsorption; creating a 40-basis-point-drop in availability to10.4%.

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

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While Midtown South remains the tightest submarket in thenation, the availability rate increased 90 basis points in thesecond quarter to 8.4%. And the rise in available supply didnot hurt rental growth as Class A and B asking rents soared.

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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 persquare foot.

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

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

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

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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.