By Al Barbarino
Though Manhattan office leasing during the first quarter of 2012 failed to keep pace with last year’s, businesses are showing healthy restraint in a bid to nurse the industry back to full strength, CBRE executives said this week.
At CBRE’s Manhattan Market Research Media Breakfast yesterday (Tuesday), Robert Alexander, the firm’s New York Tri-STate chairman, and Michael Geoghegan, vice chairman of consulting, highlighted the positive signs in the office market that are helping New York City lead the national charge to recovery.
“As the national economy produces slow but steady growth, New York City continues to outperform most other markets in the recovery of its office real estate market,” Alexander said.
Overall Manhattan leasing fell in the first quarter of 2012, from 6.21 million square feet last year to 4.65 million square feet, according to the firm’s latest data. Absorption was negative 3 million square feet, compared with negative 100,000 square feet last year.
But vacancy rates dipped across the three submarkets – Midtown, Midtown South and Downtown – in March compared with last year, from an average of 8.3 percent to 7.6 percent, while availability simultaneously decreased from 12.4 percent to 11.1 percent.
“Activity in the Manhattan office market was off last year’s pace in the first quarter,” Geoghegan said. But, he added, “It is definitely good news that businesses have pulled back from placing excess office space on the market.”
The crunch in space amid continued demand spiked average Manhattan asking rents in March to $54.53 psf, compared to $49.93 psf last March. Midtown maintained the highest asking rents, at $63.52 psf, while Midtown South saw the steepest gains, increasing by more than $6 to $48.79. Downtown rents stayed level around $40 psf.
“We have seen the advertising, legal, media and other sectors continue to expand, while financial services has paused in its real estate occupancy decision-making,” Alexander said.
Despite the freeze among financial services firms, Downtown was the only submarket to log increases in leasing activity, as information and media companies move into the area.
Leasing activity more than doubled when compared with March of last year, from 0.23 million square feet to 0.47 million square feet. Leasing outpaced 2011 levels by 36 percent during the first quarter.
Other positive news was that a number of large deals closed in the first quarter, as they did in the fourth quarter of 2011. Among the largest transactions was Bank of America’s 360,000 s/f renewal at 114 West 47th Street and Conde Nast’s 139,000 s/f expansion at One World Trade Center.
In the capital markets, Solow Realty reportedly purchased 12 West 57th Street from Gafisa S.A. for $120 million; and Paramount Group purchased a 49 percent interest – or $172.7 million – in 900 Third Ave. from Investa Office Fund.