Manhattan leasing up as vacancies stabilize.
After nearly four years of steady decline, the Manhattan commercial real estate market has finally begun to demonstrate signs of stability and renewed vitality, including an overall vacancy rate of 16.36 percent -- down from the 16.72 percent rate charted last year at this time.
This drop in vacancy also signals that leasing is outpacing the return of space to the market, either through new construction or consolidations by corporate users. According to Barry Gosin, Newmark's president, the result has been the absorption of space rather than mere "trading" of space by users who have been taking advantage of the bargain deals available in this economic climate to upgrade their space.
"As tenants have recognized and moved on opportunities in the market - either exchanging "B" space for "A" space, renegotiating deals in existing space - much of Manhattan's prime space has been absorbed," Gosin noted. "In fact, where there was once an abundance of large blocks of prime space throughout the city, there are now fewer than 10 Manhattan buildings that offer blocks of 250,000 square feet or more of "Class A" space."
According to Gosin, the market may remaining opportunities are absorbed. Newmark's Mid-Year Office Market Report shows that Midtown is, by far, Manhattan's most active market. At Mid-Year, the Midtown vacancy rate stands at 15.58 percent, with availabilities evaporating in both Class A and Class B space throughout the market. Unparalleled opportunities are responsible for the more than 6 million square feet of leasing during the first half of the year.
"Rental rates, which have continued to decline, combined with generous free rent and substantial workletters and cash contributions make the Midtown market attractive for users who wish to expand, move or renegotiate their existing leases, Gosin said. "However, in Midtown, rents and inducement packages are beginning to stabilize or decline as prime space is absorbed from the market."
Since new construction has reached a standstill in the Midtown market, only one new building will enter the market this year: 660 Madison Avenue. The extensive renovation of this building, which will house the Midtown outpost of Barney's, is nearly complete and will offer 200,000 square feet of modern space this fall. According to the Newmark Office MarketReport, Manhattan's Downtown market is lagging behind Midtown in recovery.
"The good news," said Gosin, "is that recovery is on the horizon for the Downtown market."
Vacancy rates, which had been climbing steadily for the last five years, have begun to stabilize. The current vacancy rate of 19.18 percent is just slightly higher than the 19.14 percent charted last year at this time. Newmark's Report also points to the fact that "Class A" space - boasting a vacancy rate of just 16.99 percent -- is faring better than the "Class B" space in the market, which has a current vacancy rate of 23.81 percent.
"As the market became more fluid, tenants took advantage of the situation to trade older, antiquated space for newer, high-tech space whenever possible," Gosin noted. "This 'trading' of space has helped rejuvenate the market for Class A space."
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|Title Annotation:||Newmark Real Estate Services reports on office leasing activity in New York, New York in report entitled 'Mid-Year Office Market Report', 1993|
|Publication:||Real Estate Weekly|
|Date:||Jul 28, 1993|
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