Insignia report: smaller leases rule August.
According to Insignia/ESG's September 2002 "i on the market" reports, 161 of 208 new leases completed in August were for units of less than 10,000 SF and, with the exception of several renewals, none were larger than 47,000 SF. In Midtown South, the largest new lease was just 16,000 SF.
Midtown had 928,000 SF of leasing activity in August, Downtown had 426,000 SF and Midtown South had 252,000 SF. August's leasing activity was down 18% from July in Midtown and 21% in Midtown South, but virtually unchanged in Downtown. Manhattan's overall 1.61 million SF of leasing was down 14% from August's 1.87 million SF.
The largest lease signings in Manhattan last month were actually renewals. Winston & Strawn renewed its lease for 125,000 SF at 200 Park Ave. in Midtown, and the Walt Disney Company renewed for 83,000 SF at 114 Fifth Ave. in Midtown South. The largest new leases were the Chubb Group's 47,000-SF expansion at 55 Water St. in Downtown and Latham & Watkins' 46,000-SF expansion at 885 Third Ave. in Midtown. The Legal Aid Society, still displaced from 90 Church St. because of the events of 9/11, took a total of 69,000 SF in two 18-month subleases Downtown: 36,000 SF at 1 Battery Park Plaza and 33,000 SF at 199 Water St.
Availability rates increased in Midtown South and Downtown, while decreasing in Midtown for only the second time this year. Midtown's rate dropped 0.2 points to 9.8%, while Downtown's rate rose 0.3 points to 14.4% and Midtown South's was up 0.2 points to 12.7%. The flood of sublease space that had plagued Manhattan in 2001 and early 2002 appears to be abating, with total sublease supply decreasing by 303,000 SF overall in August. Availability of direct space, however, increased by 435,000 SF during the month.
Highlights of Insignia/ESG's August 2002 "i on the market" reports include:
* Leasing activity for the first eight months of 2002 totaled 13.66 million SF, a 9% decrease from 15.01 million SF for the same period in 2001.
* Net absorption was positive in Midtown, although it was negative in Midtown South and Downtown.
* Prospective tenants seeking large contiguous units have a broad choice: 13 units larger than 250,000 SF - only one in Midtown South - and 42 in the 100,000 to 250,000-SF range.
According to Insignia/ESG's August 2002 "i on the market" report for Midtown: Midtown's leasing volume last month - its third-highest monthly total this year - was 74% greater than 534,000 SF transacted in August 2001. For the first eight months of this year, its 6.90 million SF of activity was only 5% less than the. 7.29 million SF recorded in the same period of 2001. Net absorption was positive for only the second time this year, totaling 271,000 SF. The availability rate also improved for only the second time this year as did average asking rents, which increased for the first time since January by 80 cents to $54.61 per SF. This was mainly related to asking rents being advertised for space that previously had been listed as "rent upon request."
According to Insignia/ESG's August 2002 "i on the market" report for Downtown: For the year to date, leasing activity in Downtown totaled 4.04 million SF, a 14% increase over 3.53 million SF leased during the same period in 2001, just before the events of 9/11. While sublease space decreased by 253,000 SF, direct space increased by 470,000 SF, resulting in negative net absorption of 217,000 SF. Large units of 161,000 SF at One World Financial Center and 105,000 SF at 160 Water St. contributed to negative net absorption of 217,000 SF for the month.
In the World Financial Center submarket, availability rose 1.9 percentage points to 26.8% an anomaly related to 9/11. Average asking rents decreased to $36.91 per SF at month's end, down 1.5% since July and 12% since August 2001.
According to Insignia/ESG's August 2002 "i on the market" report for Midtown South: Low demand coupled with small transaction sizes resulted in sluggish overall leasing activity in Midtown South in August. Likewise, 2.72 million SF of activity for the year to date lags 17% behind last year's total of 3.27 million SF. Of 48 new leases completed in August, 40 were for units smaller than 10,000 SF, and none exceeded 16,000 SF. The two largest deals were renewals - Walt Disney Company for 83,000 SF at 114 Fifth Ave. and Vollmer Associates engineering company for 47,000 SF at 50 West 23rd which do not contribute to statistical leasing activity because the space was never officially on the market.
There were 10 contiguous units available between 100,000 and 250,000 SF at month's end, with only one block in excess of 250,000 SF: 332,000 SF of sublease space at 601 West 26th St.
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|Publication:||Real Estate Weekly|
|Date:||Oct 2, 2002|
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