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Office market bouncing back.

According to the latest edition of the Studley Report & Spacedata, overall demand in the Manhattan office market during the third quarter increased by 23.7 percent, with more than 7.8 million square feet leased.

Year-to-date leasing levels reached 20,273,623 square feet during the third quarter, exceeding the 1995 year-end total by 731,003 square feet. The city's overall vacancy rate, which dropped to 13.2 percent during the second quarter, continued to decline, and by the end of the third quarter fell to 12.5 percent. The Class A vacancy rate also decreased since the end of the second quarter and now stands at 7.5 percent, with several submarkets enjoying rates well below 10 percent.

Leasing in Midtown Soars

Midtown Manhattan's overall leasing activity exceeded five million square feet for the second consecutive quarter, with a total of 5,764,132 square feet leased in the third quarter. Year-to-date, a total of 15,466,018 square feet has been leased in Midtown, with the West Side and Grand Central sub-markets enjoying the heartiest levels to date this year.

The overall vacancy rate in Midtown dropped from 12.7 percent at the end of 1995 to a current level of 10.3 percent, and the Class A vacancy rate declined to 5.5 percent during the third quarter from 10.5 percent at year-end 1995. The average asking rental rate in Midtown is inching upward at a moderate pace, reaching $26.93 per square foot in the third quarter, compared to $26.79 per square foot during the second quarter and $25.85 per square foot in the first quarter.

As the market begins to tighten, landlords are becoming more demanding in lease negotiations," said Ira Schuman, executive vice president and co-manager of Studley's Midtown office. "Consequently, tenants should expect landlords to be less flexible in such areas as work letters, free rent periods, renewals and base building work."

"From a decision-making standpoint, the real estate process is becoming shorter because there is increased competition for prime space," added Schuman. "Although tenants must exercise adequate due diligence before closing any transaction, they cannot afford to stall. It used to be that the longer a tenant waited to commit to a lease, the lower the rent. Now a delay will likely lead to lost opportunity."

Downtown Activity is Solid

Activity in the Downtown office market continued at the healthy rate established during the first half of 1996. Overall leasing activity in the third quarter totaled 2.1 million square feet, a figure which far outpaces the previous quarter's 1.3 million square feet. Even more dramatically, the third quarter number represents almost 75 percent of 1995's total activity.

"Interest from both the insurance and financial services industries continues to reconfirm the viability of Downtown," said Howard Grufferman, senior managing director and co-manager of Studley's Downtown office. "Leading the way is American International Group's long anticipated purchase of 175 Water Street. Also notable is Zurich Reinsurance Centre's expansion of 63,000 square feet at One Chase Manhattan Plaza."

Financial firms were active in the third quarter as well. National Fidelity Services leased an additional 63,000 square feet as part of its expansion at One World Financial Center, and Waterhouse Securities expanded into an additional 52,000 square feet at 100 Wall Street as a part of its growing presence.

"Both large and small technology and information services companies continue to exhibit interest in Downtown New York," asserts Jim Gartenberg, assistant director in Studley's Downtown office. "In a consolidation of one Midtown and three Downtown locations, Global Financial Information Corporation leased 77,000 square feet as part of a long-term sublease from Lehman Brothers. A provider of information systems to the financial services industry, GFIC was motivated by the significant technological improvements already in place at The World Financial Center and the value associated with this Downtown location."
COPYRIGHT 1996 Hagedorn Publication
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Copyright 1996, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:leasing and renting of office buildings in New York City
Publication:Real Estate Weekly
Date:Oct 23, 1996
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