While overall lease deal volume for the city is now on par with previous years, most other indicators at midyear 2012 point to a flat market, according to executives at Jones Lang LaSalle.
“A sharp rebound in leasing activity surprised many in the second quarter as decision makers for some of New York’s largest tenants chose to lock in renewals at current pricing,” said Peter Riguardi, president of Jones Lang LaSalle’s New York office.
“A handful of major transactions, totaling more than 2.7 million square feet, in the spring spurred leasing volume to a level more typical of recent years. Other market indicators — vacancy, asking rents and absorption — were mostly stable.”
JLL pegged New York’s overall vacancy rate unchanged from the first quarter at 10.5 percent. The city’s Class A vacancy rate rose to 11 percent this quarter, an increase of 2.8 percent from the previous quarter.
The Class B vacancy rate fell slightly to 10.0 percent at midyear 2012, a drop of 1.0 percent from the Class B vacancy rate of 10.1 percent in the first quarter of 2012.
Average asking rental rates inched up throughout Manhattan in the second quarter of the year. Class A rents rose to $65.62 psf this quarter, an increase of 1 percent from Class A rates of $64.94 per square foot the previous quarter. The city’s Class B rents grew to $45.61 psf at midyear 2012, a boost of 2.2 percent from Class B rates in the first quarter.
“Still, landlords in stronger positions have been reluctant to lower face rents. Many owners seem prepared to wait for a more landlord-favorable market in 2013 and 2014.”
“As previously predicted, blocks of space coming to the market at the World Trade Center and along Water Street drove both vacancy and asking rents higher in the second quarter,” said Riguardi.
“We expect this trend to continue as additional tranches of space at Four World Trade Center are brought to the market and large blocks are returned to the market at the World Financial Center.”
While Lower Manhattan’s tenant base is becoming more diverse, the financial services industry still drives the market.
The largest lease signed Downtown — and the second largest lease in Manhattan so far this year — was Morgan Stanley’s renewal and expansion at One New York Plaza for more than one million square feet. Lower Manhattan’s overall vacancy rate rose to 9.8 percent in the second quarter of 2012, an increase of 2.1 percent from the overall vacancy rate of 9.6 percent in the first quarter of 2012.
