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NEW YORK CITY-Manhattan’s office leasing market showed continued signs of improvement in August, with CB Richard Ellis reporting that Midtown’s monthly tally reaching more than one million square feet for the third month in a row. A Colliers ABR report on class A office noted an uptick in leasing activity that pushed the sector’s vacancy rate down to 11.8% from 12% in July. “This is only the second decline in the past year and the most significant,” according to Colliers.

The Midtown leasing tally of 1.19 million square feet, while seasonally off from the July figure of 1.58 million square feet, was nonetheless up from the August 2008 total of 830,000 square feet, CBRE says. Midtown South’s tally was also up year-over-year, from 110,000 square feet in August ’08 to 180,000 square feet last month.

Downtown’s year-over-year gain was even more notable, according to CBRE figures: the 430,000 square feet leased there in August of this year was more than triple the monthly tally of 130,000 square feet registered for the same month last year. However, the submarket’s availability rate climbed 400 basis points to 11.4% from July, whereas the availability rates in Midtown and Midtown South saw a month-to-month decline. However, Downtowns vacancy rate of 7.5% is still the lowest in town.

A Newmark Knight Frank report paints a slightly bleaker picture for Downtown. “Conditions in the Downtown submarket continued to weaken, as the year-to-date total net absorption reached negative 1.1 million square feet with the addition of 128,484 square feet of space to the market” in August, according to Newmark. “The availability rate increased to 12.6% from 12.5% in July and was up from 10.1% reported one year ago.”

For Midtown, Newmark cites “considerable improvement in August” as 441,000 square feet of space was removed from the market, bringing the year-to-date net absorption total to negative 6.7 million square feet. Newmark also reported a 200-basis point drop in Midtown’s availability rate from July, although it was from 15.1% to 14.9%, compared to 9.6% a year ago.

Midtown South experienced its eighth consecutive month of negative net absorption, as 18,594 square feet of space was returned to the market. That brings the year-to-date net absorption total to negative 4.7 million square feet. The availability rate increased slightly to 13.3% from 13.2% in the previous month, and was up from 8.3% reported one year ago, according to Newmark

Asking rents continued to decline month-over-month in all three submarkets. CBRE put the average figures at $57.94 per square foot in Midtown, versus $59.30 in July; $42.68 per square foot in Midtown South, compared to $43.49 in July; and $40.20 per square foot Downtown, off from the July average of $41.19. The sharpest year-over-year decline on a percentage basis was for Midtown, where the August tally was down more than 30% from a year ago.

However, Colliers says class A asking rents in Manhattan actually “squeaked out a slight increase” in August, climbing to an average $64.36 per square foot, up 19 cents from $64.17 per square foot in July. Summing up the evidence of greater vitality as “welcome news,” Colliers’ director of research, Robert Sammons, notes in the report that “it does not necessarily mean the Manhattan real estate market is out of the woods yet.”

For one thing, several major blocks of space are expected to become available over the remainder of the year. In addition, writes Sammons, “the economy in general has not yet righted itself as local and national job layoffs continue. Expect an unsteady market for the remainder of the year with Manhattan leasing activity somewhat stronger, due primarily to tenants pushed against lease expirations and/or tempted by lower rents, but net absorption remaining deep in the negative column.”

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