The office realm in Manhattan has opened 2016 strong. Leasing activity is nearly 30 percent above the ten-year average and 11 percent above the start of 2015.
Overall, the asking rents for the borough increased for the 12th consecutive quarter.
The continued, robust demand led to 4.4 msf leased in Midtown, 2.7 msf in leased in Midtown South, and 2.2 msf leased Downtown. Overall asking rents are at $72.46/sf, just 1.2 percent off the all-time high.
Despite the call for space and the climbing asking rents, Joe Harbert eastern region president for Colliers International said that some landlords may actually be backing off on pricing in the near future.
“The Manhattan office market is off to a good start in 2016 with several TAMI sector firms maturing and taking more space, the local economy still producing new jobs, and continued demand from investors to purchase core assets,” he said.
“Though selective, we also saw downward repricing in some properties as landlord ebullience turned to practical reality. There was recognition among owners that upward repricing in recent quarters might have gone just a bit too far. This is a normal market adjustment, with rents still at or near historic levels.”
Harbert told Real Estate Weekly that owners taking their feet off the gas pedal doesn’t shock him.
“It doesn’t surprise me at all. The good think about how real estate has evolved in New York is you have very sophisticated landlords,” he said. “The sky is not falling.
“They’re pretty much in tune with the market place and, because we do share a lot of information, they have a lot more data that they used to have.”
Harbert said that the when space isn’t rented, owners are realizing that they are losing money by letting space sit for an extended period of time. For the space that is part of the limited vacancy rates, they are choosing to monetize those spots sooner at a relatively discounted rate instead of waiting for a larger pay day down the line.
“There was this view of the market that everything was always going up,” Harbert said. “You have owners doing the intelligent thing.”
John Goodkind, director of leasing with Koeppel Rosen LLC,, a commercial real estate firm launched earlier this year by David Koeppel and the Rosen family, said that with vacancy hovering around five percent in Midtown South, he’s yet to see a contraction within the company’s portfolio of office buildings.
“Demand is still pretty robust,” said Goodkind. “I’m not necessarily seeing a rise in rents, but certainly no drop offs. We’re getting very close to our asking rents.
“Every time you think the spigot is going to get turned off, more tenants come out of the spigot.”