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Midtown leasing enjoys September surge.

Benefiting from the strong performance of two sub-markets at opposite ends of the price spectrum, Manhattan's Midtown office market continued its recovery in September, building on the momentum established over the summer.

So reports Stephen B. Siegel, president of the Edward S. Gordon Company, Inc. (ESG), in the firm's monthly analysis of the Manhattan commercial office market.

Due to a continuing surge of activity in both the high-priced Sixth Avenue/-Rockefeller Center corridor and the least expensive Penn Station/Garment Center district, total Midtown leasing volume rose 13 percent from a year ago to 1.05 million square feet in September, following a 38 percent jump in leasing in August.

"Leasing activity, particularly in those two sub-markets, continues to be very strong," asserted Siegel, who noted that about one-third of all Midtown leasing in September occurred in the Sixth Avenue/Rockefeller Center district, bringing the volume of space leased in the area to 1.9 million square feet so far this year. The area's second hottest district, Penn Station/Garment Center, has seen higher leasing volume fueled primarily by small space requirements.

This surge of leasing is producing a methodical reduction in the amount of Midtown space available. Positive absorption totaled 250,000 square feet in September, pushing the availability rate down 0.2 percentage points to 15.6 percent. That rate is a full percentage point below the level of a year earlier, and will fall further in October, Siegel predicted.

While only 175,000 square feet of new leasing took place Downtown in September, tenants in lower Manhattan have already leased more space (3.8 million square feet) this year than in all of 1992. At the current pace, total leasing may well exceed 5 million square feet for the first time since 1990, forecasted Raymond T. O'Keefe, executive director of ESG's Downtown Manhattan office. By contrast, a total of 6.1 million square feet was leased Downtown in 1992 and 1991 combined.

The Downtown market is also showing positive net absorption for the year (114,000 square feet versus 2.1 million square feet in negative absorption in 1992). Should this pattern hold in the fourth quarter, it will mark the first year of positive absorption Downtown since the mid 1980's.

According to O'Keefe, Downtown's overall availability rate remained unchanged last month at 22.2 percent. In contrast to this persistently high level, the World Trade Center/World Financial Center remains the tightest submarket in all of Manhattan, with an availability rate of just 10.6 percent.

In the Midtown South marketplace, leasing velocity slowed appreciably in September - although at 75,000 square feet, demand actually edged up from a year earlier. For all of 1993, activity remains flat at 1.2 million square feet.

Most active of all Midtown South segments is the Flatiron District, which has accounted for 36 percent of the space leased in the district this year, including the market's largest transaction in September - Dorf & Stanton Communications' lease for 17,600 square feet at 111 Fifth Avenue. Overall, the Midtown South availability rate inched up 0.1 percentage points last month to 17.7 percent

According to Siegel, the growth of Midtown South during the 1980's was due to its cost advantage over the Midtown and Downtown markets.
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Title Annotation:New York, New York office leasing activity increases September 1993
Publication:Real Estate Weekly
Date:Oct 27, 1993
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