Midtown Keeps Up Leasing Momentum

NEW YORK CITY-Midtown office leasing exceeded one million square feet for the fourth consecutive month in September, continuing the release of pent-up demand by tenants who generally sat out the third quarter of 2008 and the first half of 2009, CB Richard Ellis reported Wednesday. The company’s third-quarter report, which also includes the monthly snapshot for September, notes that leasing volume for the past four months has exceeded the five-year rolling average.

The steady activity–which has included a number of early renewals–has helped bring stability to pricing as the slide in asking rents has tapered off, CBRE EVPs Paul Amrich and Robert Stillman said at a media briefing Wednesday morning. “The majority of people out there feel that rents are finding a bottom,” Amrich said.

Manhattan leasing volume overall will probably match 1991 levels by year’s end, said Stillman, while Amrich said Midtown’s ’09 performance will be comparable to 2002–both years being among the weakest in the past two decades. Whether that momentum carries over into 2010 is an open question; Stillman said we could see peaks and dips over the next several months. One factor that may slow down leasing velocity is landlords themselves, as they put the brakes on early renewals to avoid losing out on better rents as the market turns upward again.

Midtown’s availability rate rose slightly in September to 14.9% from 14.8% in August; however, the large-scale influx of sublease space is probably over, Amrich said. The gap in the taking rent index continued to narrow, with net rents rising from 81.2% of the asking rate in August to 82.8% in September, as compared to 91.6% a year ago, according to CBRE. Average asking rents diminished by just six cents between August and September, ending the month at $57.88 per square foot. A year ago, it was $84.74.

In Midtown South, the availability rate increased by half a basis point from 14.3% in August to 14.8% in September, with average asking rents dropping to $42.45 per square foot from $42.62 the month prior. Downtown’s availability rate edged up from 11.4% in August to 11.8% in September, as asking rents saw a month-over-month decrease of 66 cents per square foot to $39.54.

One factor that may be contributing to that rise in availability Downtown is tenants taking advantage of bargains on quality Midtown space to relocate there. For example, law firm Holland & Knight is vacating its longtime space at 195 Broadway to sublease 82,551 square feet of Clifford Chance’s space at 31 W. 52nd St. The firm plans to set up shop in Midtown at the beginning of next year.