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2013 a tough year to follow on leasing front

By Konrad Putzier

Driven by a booming Midtown South, Manhattan’s office market had a spectacular fourth quarter. But the outlook for 2014 is less rosy.

13.1 million square feet of office space was leased in the quarter, according to Colliers International’s quarterly report. This was well above the quarterly Manhattan average of 6.2 million square feet over the previous five years.

Total leasing in 2013 reached 33.9 million square feet, 42.4 percent higher than the 23.8 million recorded in 2012. Average asking rents across Manhattan rose to $60.41 psf in the fourth quarter, up from $59.14 in the third quarter and $56.13 in the fourth quarter of 2012, according to Colliers.

JOE HARBERT

This growth was primarily driven by Midtown South, where the Class A average asking rent reached $64.52 psf, up 17.7 percent from $54.82 in the fourth quarter of 2012. Downtown rents also grew moderately, with Class A rents rising 9.0 percent over the fourth quarter 2012 to $51.62 per s/f.

Cassidy Turley’s fourth quarter office report paints a similar picture, although it puts the average asking rent for Manhattan somewhat higher than Colliers, at $65.61 psf.

It found that availability fell by 0.4 percentage points to 10.8 percent across Manhattan, despite the fact that 4.1 million s/f of office space was created — the most in more than 10 years.

According to the report, new construction produced more than 5.2 million s/f of positive absorption in the fourth quarter, the highest one-quarter total since 2005’s third quarter.

Cassidy Turley’s report noted that new leases over 100,000 s/f — 15 were signed in the fourth quarter — played a big role in Midtown’s strong showing.

But Colliers’ report cites precisely these large deals as reason to be cautious for 2014. “The year-end leasing totals were somewhat skewed by several large renewals and sale leasebacks over the past few quarters, including those for Sony, JP Morgan Chase, Citibank, and CME Group Inc.,” the report noted.

“Sustained but moderate employment growth and continued retrenchment in the financial activities sector suggest that a repeat of the 2013 leasing totals may be a challenge for next year, despite the property market’s overall upswing.”

Joseph Harbert, president of the Eastern Region for Colliers International, said, “With an uneven recovery we need to be cautious in our 2014 projections.

“We expect to see continued overall improvements in the year ahead, and though repeating these 2013 totals will be a challenge, the market does seem to be gaining sustainable momentum.”

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