Absorption Turns Positive After Three Years

NEW YORK CITY-US CBDs recorded positive overall absorption of office space for the first time in three years, Cushman & Wakefield said Wednesday. The 2.2 million square feet of net absorption at the end of 2010 marked a 106.5% increase in occupied space from the 33.5 million square feet of negative absorption during 2009, according to C&W.

“Positive absorption is a promising sign for the US office market’s recovery,” says Maria Sicola, executive managing director and head of Americas research for C&W, in a release. So too is an increase in leasing velocity: the 31 CBDs measured by C&W tallied 62.4 million square feet of deals this past year, up 26.3% over ’09’s total of 49.4 million square feet.

The fourth quarter of ’10 produced 16.9 million square feet of CBD office leases. That’s the most active quarter since Q2 2008, when these markets garnered 19.9 million square feet of leasing activity.

Also helping turn the absorption tide positive was a relatively low amount of new construction. Seven-and-a-half million square feet of office space was added to the total, the lowest yearly figure since 2005’s 5.2 million square feet. Sicola says the limited amount of development “will play a major role in sustaining our recovery.”

Average vacancy for the 31 CBDs declined 30 basis points to 14.4% from the prior quarter, says C&W. Lowest vacancy among the CBDs was in Manhattan’s Midtown South, down 50 bps from Q3 to 8.6%. The largest quarterly decline was in California’s Orange County CBD, down 120 bps from Q3 to 22.6%.

Less movement was seen on the pricing front, however. Asking rents averaged $36.43 per square foot at year’s end, down nine cents from the prior quarter. While 15 of the 31 CBDs saw quarterly increases in rental rates, with the remainder seeing declines, no CBD saw prices move up or down by more than $1 during Q4.