NEW YORK CITY—A strong office leasing market fueled by a surging economy sparked a decline in office vacancies in Manhattan in the third quarter and the highest office rental rates since year-end 2008.

Brokerage firm Avison Young says that the Manhattan office market continued its strong performance in the third quarter. The Midtown market has accounted for more than 50% New York City's office leasing activity in 2014 year-to-date. The Downtown district is also performing well, sporting a Class A office vacancy rate of 11.7% at the end of the third quarter, the lowest rate for Downtown since the start of 2013.

“As the employment figures improve, and New York City's economy continues its upward swing, the demand for class A office space is driving an increase in rental rates throughout the Manhattan office market, particularly in Midtown,” says Arthur Mirante, Avison Young principal and tri-state president.

Avison Young principal Michael Gottlieb is also bullish on the Maanhattan office market. “The strengthening economy is driving an uptick in signed large leases greater than 100,000 square feet,” he says. “With Hudson Yards on the horizon, and the trend in companies looking to consolidate operations in order to enhance efficiency, the increase in the number of large leases should continue in the near term.”

The average Midtown class A asking rent currently stands at $80.13 per-square-foot, the highest rate since the end of 2008 when rents topped $85.55 per-square-foot. The Downtown submarket's average asking rent was $53.50 pewr-square-foot in the third quarter, with the World Trade Center submarket asking $67.09-per-square-foot. In its report, Avison Young says it anticipates that 1 World Trade Center will be entirely filled by next spring.

Midtown South class A asking rents closed the third quarter of 2014 at $78.07-per-square-foot, a decrease from the previous quarter, as higher priced space in the market was leased.

Avison Young reports that there have been 41 office leases completed in Manhattan this year that were greater than 100,000 square feet, compared with only 30 one year earlier. Eleven of the deals completed thus far in 2014 were in excess of 200,000 square feet.