Park Avenue leads Midtown leasing.

Midtown Manhattan's Park Avenue segment accounted for more than 40 percent of the 1.1 million square feet of total leasing activity in the market during the month of November. The driving force behind Park Avenue's exceptional performance was Morgan Guaranty's 300,000 square-foot lease at 345 Park Avenue - the largest transaction of the month, according to the Edward S. Gordon Company's December Office Market Report.

The Sixth/Rock Center segment also turned in a stellar performance due to Deutsche Bank's 130,000 square-foot lease at 1301 Avenue of the Americas. This segment boasts the lowest availability rate in Midtown at 9.1 percent.

Spurred by Park Avenue's and Sixth/Rock Center's strong leasing momentum, the Midtown market recorded its second straight month of positive absorption. With 829,000 square feet of positive absorption in November, Midtown's year-to-date absorption has jumped to over 1.4 million square feet.

Midtown's availability rate descended by another 0.4 percentage points in November and now stands at 13.5 percent - down from 14.2 percent at the start of the year.

According to the ESG report, Midtown's asking rents rose by 54-cents this year to an average of $33.01 per square foot. Park Avenue led the way with the highest average rents of $44 per square foot, while Penn/Garment rents remained the lowest at $23.80.

Downtown Recovery Back on Track

The Downtown office market is back on track after a break from the revival of the past few months. In fact, the recovery of the newest Downtown office buildings reached a new milestone in November as the availability rate for these buildings dipped into single digits for the first time since the market's collapse in the late 1980s.

The availability rate for post-1980 buildings dropped to 9.9 percent due to strong leasing activity at the World Financial Center (WFC). At 3 WFC, for example, Lehman Brothers retook 29,000 square feet, while at 1 WFC, National Fidelity Service leased 63,000 square feet.

The disparity between new, technologically-advanced buildings and older, outmoded Downtown properties is growing by leaps and bounds. For example, post-1980 buildings currently command average rents of $32.20 per square foot - 25 percent ($6.50) above the Downtown average, while average rents in secondary buildings developed before World War II average only $20.50 per square foot.

With an availability rate of 31.3 percent, it is not surprising that secondary pre-war buildings have become the target of the residential conversion trend taking over Downtown Manhattan. Examples of residential conversions of secondary pre-war buildings are 25 Broad Street and 45 Wall Street. In addition, 127 John Street, a postwar building, is slated for conversion by Rockrose Development Corporation. As a result, Downtown's availability rate is 2.1 percentage points below its level at the start of the year.

According to ESG's Office Market Report, average asking rents in the Downtown market remained fiat at $25.67 per square foot. The World Trade Center/World Financial Center segment posted the highest average asking rent Downtown at $32.00 per square foot, while the City Hall/Insurance segment posted the lowest asking rent at $22.40 per square foot.

Midtown South's leasing performance in November was uninspired to say the least. Total leasing slowed to 138,400 square feet - the lowest total since June. Despite the market's lackluster performance, available office space has continued to shrink. In November, 73,000 square feet of positive net absorption helped Midtown South shed another 0.2 percentage points to register at 12 percent. Year-to-date absorption now totals 474,000 square feet, and the market-wide availability rate has dropped by 1.2 percentage points since hitting its peak at 13.2 percent at the end of 1995.

At $20.49 per square foot, Midtown South's average asking rent remained steady in November. The Park Avenue South/Madison Square segment commanded the highest rent at $25.90 per square foot, while the Hudson Square/Tribeca segment posted the lowest asking rent at $14.70 per square foot.