Midtown Soars, Downtown Lags in Q2 Leasing

NEW YORK CITY—“Very, very strong leasing” characterized second-quarter Midtown office, CBRE vice chairman Peter Turchin said Tuesday, with the submarket up 37% over its five-year quarterly average. For Downtown, though, the results were less positive, as Lower Manhattan saw a 43% year-over-year decline and a 34% drop in the quarterly average for deals during Q2.

In spite of this shortfall, Downtown actually has seen asking rents increase faster thus far in 2015 than either Midtown or Midtown South, although both submarkets have posted far more impressive leasing statistics. Speaking at CBRE's quarterly media briefing Tuesday, Turchin attributed this in part to a lag in rent increases between Midtown South and Downtown, since the former saw an uptick in leasing sooner than the latter did. Moreover, Lower Manhattan owners likely anticipated a wave of leasing momentum Downtown following the large-scale deals signed by GroupM and Time Inc. in late 2013 and mid-2014, respectively.

So far this year, that anticipation hasn't panned out in terms of actual deals. However, News Corp. and 21st Century Fox have signed letters of intent to occupy a combined 1.3 million square feet at Silverstein Properties' 2 World Trade Center.

Midtown South leasing in Q2 was up 29% over its five-year average, according to CBRE. That volume led to the submarket finishing the quarter with an availability rate of 8.2%, down 190 basis points from a year ago. Big deals of 250,000 square feet or more were noticeably absent from the quarterly tallies, though, a fact which Turchin attributed to a lack of available blocks of that size since last fall. Instead, the numbers of leases of up to 9,999 square feet and from 10,000 to 24,999 square feet increased Y-O-Y.

Overall, absorption totaled 1.93 million square feet across Manhattan, with all three submarkets seeing a decrease in their availability rates. Average asking rents rose to $69.71 per square foot, up 6.6% from a year ago.