Midtown leasing strong, but vacancy grows.

Strong leasing buoyed the Midtown Manhattan market during the third quarter, according to statistics released by the international real estate services firm Cushman & Wakefield.

Year-to-date primary and secondary leasing totalled 15.7 million square feet, a 25 percent increase over last year, and just 2.3 million square feet shy of total leasing activity in 1993.

"We continue to see a great deal of activity as the economy is expanding and white collar employment is growing," said Richard Donohue, managing director of Cushman & Wakefield's New York offices.

Several large transactions were completed during the quarter. Alliance Capital Management increased its occupancy by 249,000 square feet at 1345 Avenue of the Americas. S.G. Warbug more than doubled its space in its relocation to 161,000 square feet at 277 Park Avenue. 161,000 square feet at 277 Park Avenue. Bear Stearns & Company signed for 137,000 square feet at 575 Lexington Avenue. Anderson Kill Olick and Oshinsky will consolidate its offices from two locations to 124,000 square feet at 1251 Avenue of the Americas, and the News Corporation expanded to an additional 120,000 square feet at 1211 Avenue of the Americas.

Major space additions put a damper on both the primary vacancy rate and the primary rate of absorption. Metropolitan Life Insurance Company placed nearly two million square feet on the market at 11 Madison Avenue. The IBM space at 590 Madison Avenue was officially placed on the market, totalling 613,000 square feet. Other major blocks added to the market included Lord Day Lord's 132,000 square feet at 1675 Broadway and 127,000 square feet in the GM Building, to be vacated by FCB/Leber Katz.

As a result, the primary vacancy rate increased to 14.4 percent, from 13.9 percent at the end of the second quarter. Year-to-date absorption registered a negative 1.4 million square feet in the primary market. The secondary vacancy rate decreased to 17.2 percent, from 17.9 percent. Year-to-date absorption for the secondary market was 364,000 square feet. None of the large space additions were located in secondary buildings, and leasing activity in this market continues to outpace last year's level.

Primary asking rental rates edged up to $33.64 per square foot from $33.45 in the second quarter. For the first time since mid-1990, the primary asking rental rate posted a year-over-year increase, up from $33.03 per square foot in 1993. The secondary rental rate fell slightly, to $19.58 per square foot from $19.67 last quarter.

The largest building sale in terms of value during the quarter was Metropolitan Tower, 142 West 57th Street. Pacific Eagle Investments purchased the lower commercial portion of the building, approximately 500,000 square feet, for $59.1 million, or $265 per square foot.

Other building sales included 830 Third Avenue, the former Girl Scouts Building, which was purchased by RFR Holdings for $11.25 million, or $78 per square foot. The leasehold on 654 Madison Avenue was bought by Rolfe Group for $7.25 million. Also, 400 Park Avenue was purchased by RFR Holdings, a German group, for $16.5 million, or $83 per square foot.

One building was completed in the quarter. The 170,000 square-foot Lighthouse Building at 110 East 60th Street will be fully owner-occupied by The Lighthouse, a non-profit organization.

Downtown

The Downtown market continues to experience relatively healthy leasing. In the third quarter, 815,464 square feet was leased, nearly an 11 percent increase over last year.

Daiwa Securities America, Inc., a financial services firm, signed the largest lease of the quarter at Financial Square for 130,000 square feet. Johnson & Higgins expanded into 68,000 square feet at Two New York Plaza and Fortis, Inc. committed to 50,000 square feet at One Chase Manhattan Plaza.

As a result of corporate consolidations and space additions, the primary vacancy rate rose to 17.9 percent from 17.2 percent in the second quarter. Buildings constructed in the 1980s and 1990s also witnessed a vacancy rate increase to 10.8 percent, up from 9.2 percent in the second quarter.

The secondary vacancy rate rose from 25.5 percent to 26.3 percent. In conjunction with rising vacancy rates, secondary absorption was negative 400,000 square feet, while primary absorption registered negative 300,000 square feet.

The primary asking rental rate rose from $29.59 to $30.11 per square foot. Secondary asking rental rates rose for the second consecutive quarter, from $19 to $19.10 per square foot.