Highlights and trends for the Manhattan market.
Leasing activity by entertainment companies, law firms, publishers and general services corporations continues to be healthy. Foreign-based firms are also realizing the importance of the U.S. economy and the benefit of having a major U.S. presence, and are choosing Manhattan as their preferred locale. Manhattan is a bargain when compared to other business capitals. Companies have realized it is relatively less expensive to grow in Manhattan than it is in comparable foreign business centers such as Tokyo or London. However, the true value of being located in Manhattan is the exposure to the rest of the corporate world that only this business mecca can offer.
While diverse industry activity spurs the growth of the real estate market, stability supports it. The continued consolidation of major corporate entities has often created demand for new and efficient facilities. For the first time in about a decade, the office market is well-balanced in terms of supply and demand. Healthy demand outweighs supply, to the extent that if all or a majority of the significant transactions in the marketplace close by the end of the year, there will be very few, if any, large blocks of space in Class A properties available for lease or purchase. The Manhattan market is therefore balanced enough to survive a stock market correction, shift in interest rates, or a slight decrease in demand due to the fact that there will not be an over abundance of new supply to the market in the foreseeable future.
The majority of the new construction taking place in the market today is for buildings that are significantly pre-leased. Today's available capital is not being risked on speculative building as it was in the 1980s. The Durst project at 4 Times Square is a good illustration of this kind of risk-minimization strategy, whereby Conde Nast (636,000 square feet) and Skadden Arps (660,000 square feet) made commitments to the project prior to construction commencement.
The Downtown market achieved record levels this year, with leasing activity reaching a 10-year high of 5.7 million square feet. Absorption also reached its highest level of the decade, 1 million square feet. The Revitalization Program is significantly impacting the Lower Manhattan market. Existing office availability is shrinking as residential conversions continue as planned. The overall vacancy rate registered 17.6 percent for the year, a decrease from the previous year's 20.2 percent, and direct rental rates increased from $24.97 to $25.35 per square foot in 1996.
Midtown/Midtown South Overview
With nearly 300 million square feet in 1,191 properties, the Midtown/Midtown South office market contains the largest inventory in the nation. Leasing in Midtown reached a healthy 18.6 million square feet, exceeding last year's level by nearly 11 percent. The Grand Central submarket recorded the highest level of activity, with 3.7 million square feet leased. Overall absorption was positive, totaling 1.8 million square feet.
Leasing activity in Midtown South was strong and totaled 4.4 million square feet, driving the overall year-to-date absorption to a positive 664,000 square feet. Overall direct asking rental rates in Midtown South rose to $16.87 per square foot from $15.01 per square foot in 1995.
Overall, Cushman & Wakefield is confident that New York City, the international, communications and financial capital of the world, will continue to survive and thrive as we move toward the new century.
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|Title Annotation:||Focus On: Commercial Sales & Leasing; office-space leasing|
|Author:||Falus, Thomas P.|
|Publication:||Real Estate Weekly|
|Article Type:||Industry Overview|
|Date:||Mar 12, 1997|
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