Available space builds in Midtown.

Midtown South ice cold, but Downtown shows life

In most segments of Midtown Manhattan, more space has been returned to the market than has been leased this year, sending the overall availability rate on an upward trend. This year's relentless growth of available space continued in November as Midtown posted its third consecutive month of negative net absorption, and the availability rate rose to 14.1 percent - up from 13.5 percent at the onset of the year, according to the Edward S. Gordon Company's November Office Market Report.

"Although the build-up of available space is evident in Midtown as a whole, not all segments have suffered a similar fate," noted Stephen B. Siegel, president of ESG. Siegel pointed out "that some Midtown segments remained strong in November." Both Fifth/Madison, a pillar of strength throughout 1995, and Sixth/Rock Center, which accounted for more than one-third of the total Midtown leasing in November, bucked the upward trend in availabilities. As a result, the availability rate dipped to 14.5 percent in Fifth/Madison and 10.2 percent in Sixth/Rock Center.

Ironically, despite the signing of a 240,000 square-foot lease at 787 Seventh Avenue (the last remaining 250,000 square-foot block west of Fifth Avenue and north of 34th Street) by Wilkie Fart & Gallagher, Midtown leasing velocity slowed appreciably to 919,000 square feet.

According to the ESG Office Market Report, asking rents in Midtown average $32.46 per square foot - down eight-cents from last month. Park Avenue rents remain highest at $43.80, while Penn/Garment rents are lowest at $24.20.

Downtown Plan Contributes to Highest Leasing Activity Since January

Driven by the signing of Sanus/New York Life's 200,000 square-foot lease at One Liberty Plaza, total leasing Downtown reached 468,000 square feet in November, up from just 174,000 square feet in October and the highest monthly total since January. This stir of activity was spurred in part by the Downtown Revitalization Plan's enactment in late October. Some Downtown tenants had been waiting for the plan to become law before committing to new leases in order to reap the financial benefits.

The energetic leasing activity, combined with a lack of any new space coming back on the market, resulted in the first month of positive absorption Downtown since May. Over this five-month period, there has been a cumulative negative absorption of 1.1 million square feet, which pushed the availability rate from 24.3 percent to 25.7 percent. However, November's 323,000 square feet of positive net absorption caused the availability rate to drop to 25.4 percent.

Class A properties constructed after 1980 continue to outperform the market as a whole by a wide margin, as evidenced by the availability rate's decline for this property type to 10.4 percent.

Asking rents Downtown dropped a whopping 56-cents from last month and now stand at $25.49 per square foot. The World Trade Center/World Financial Center segment commands the highest asking rent at $32.80 per square foot.

Midtown South Posts Worst Performance of the Year

Midtown South's leasing activity was ice-cold in November, posting a meager 76,000 square feet in total leasing - by far the weakest performance all year. This decline, however, did not come as a surprise, as leasing activity has been waning in Midtown South since August, due in part to the diminishment of space alternatives in this market.

Despite the slow leasing pace, the supply of excess office space eased further during November. Thanks to 35,000 square feet of positive net absorption, the market-wide availability rate dropped by 0.1 percentage point to 11.3 percent. The Chelsea segment was responsible for most of the month's improvement, as its availability declined 0.8 percentage points to 16.8 percent.

Average asking rents in Midtown South remained steady in November at $16.81 per square foot. Flatiron rents remain the highest at $19.80 per square foot. The Hudson Square/Tribeca segment commanded the lowest asking rents at $13.30 per square foot.