Manhattan Office Market Sizzles

NEW YORK CITY—The Manhattan office market was as hot as the temperatures last month, posting its sixth straight month of positive space absorption, according to brokerage firm DTZ.

In its latest office market report released today, DTZ notes that the Manhattan office market posted 464,826 square feet of positive space absorption in July. While the office availability rate in the borough fell just 10 basis points to 9.4%, Richard Persichetti, vice president, research, marketing and consulting for DTZ, states in the report that July was the first month when all three Manhattan markets contributed to the decline in available space. In addition, 13 of the 17 submarkets posted declines in the available supply. Class A asking rents increased $0.25-per-square-foot to $77.43-per-square-foot, while Class B asking rents jumped $1.42-per-square-foot to $61.81-per-square-foot because of an increase in demand in the Midtown South market.

Midtown South continues to be Manhattan's hottest market with four of the five submarkets having availability rates below 7.0%. Availability dropped 20 basis points in July to 6.7%. Midtown South posted positive 152,642 square feet of office space absorption, bringing the region's year-to-date total to positive 222,873 square feet. Demand from the technology, advertising, media and information services sectors continue to fuel market activity, comprising 60% of Midtown South's leasing volume, according to DTZ.

Both Class A and Class B asking rents in Midtown South rose significantly in July, as Class A asking rents spiked by $4.94-per-square-foot to $77.73-per-square-foot—primarily due to the high asking rental prices at 11 Madison Ave. Class B asking rents surpassed $70.00-per-square-foot for the first time in history and were up $3.13-per-square-foot to $71.27-per-square-foot.

Midtown posted solid results in July with seven of the nine submarkets enjoying positive absorption with 256,895 square feet coming off the market. Midtown's 2015 absorption now totals a positive 342,353 square feet. The availability rate decreased another 10 basis points to 9.5%, as the direct available supply dropped to just under 20 million square feet for the first time since December 2008. The market recorded 23 lease deals greater than 100,000 square feet signed through July, compared to 17 through the first seven months of 2014. Demand has reduced the large blocks in Midtown to drop from 51 to 46 in the past 12 months.

Class A asking rents increased $0.46 per-square-foot to $86.12 per-square-foot. Fifth Ave./Madison Ave. asking rents rose $0.73 per-square-foot to $128.20-per-square-foot. Class B asking rents continue to rise, increasing $0.75 per-square-foot to $62.10-per-square-foot.

The Downtown market made some strides in reducing the 1.6 million square feet of space added to the market in the first quarter. While 298,655 square feet of space was added to the market at 200 Vesey St., as American Express plans to vacate a portion of their space, Downtown still posted 55,289 square feet of positive absorption last month. Downtown's availability rate dropped 10 basis points to 12.0%. Downtown inked its two largest relocations this year from Midtown and Midtown South during the month of July with Gucci and SandBox Studios leasing a combined 155,224 square feet. Class A asking rents increased $0.17 per-square-foot to $62.41-per-square-foot. Class B asking rents remained flat in July, increasing 0.07 to $44.25 per-square-foot, but still increased 8.1% over the past 12 months.