Cassidy Turley: Positive Signs for NYC Office Market

Cassidy Turley released its August Manhattan Office Report and its findings revealed that the summer ended on a high note.
Cap markets photo
Richard Persichetti, of Cassidy Turley

Cassidy Turley released its August Manhattan Office Report and its findings revealed that the summer ended on a high note.

The report, which broke down the Midtown, Midtown South and Downtown submarkets, showed that 713,392 square feet of absorption was recorded in the month of August, bringing the total to more than 1.5 million square feet for the year.

“One of the big takeaways is that Midtown is starting to get its legs behind it, meaning from 2011 to 2012, Midtown South carried a soft recovery, and now we’re starting to see things heat up in other areas of the market,” Richard Persichetti, Cassidy Turley’s vice president, Research, told Commercial Property Executive. “We are seeing more deals get done, not as much space is coming onto the market and things are looking good for Midtown.”

Midtown South Class A office rents remained flat in August at $67.13 per square foot, while Class B asking rents rose $0.25 per square foot to $60.04. At 11.2 percent, Midtown availability is the lowest it’s been since 2008 and while rents in Midtown haven’t been as significant as Midtown South, it’s expected that rents will increase in the months ahead.

Downtown posted its second month of positive absorption with 336,906 square feet recorded in August, dropping 40 basis points to 13.6 percent.

“When you look at the numbers for Downtown, with availability at 13.6 percent, there’s new supply right around the corner with the World Trade Center new buildings, which will push availability higher,” Persichetti said. “However, that doesn’t discount the demand that Downtown has seen lately. Since January 2012, 37 percent of the new leases signed have come from tenants who have relocated from Midtown and Midtown South. Downtown on average is still $10 less a square foot that Midtown South and $25 less the Midtown.”

The report also showed the Penn Plaza/Hudson Yards submarket had the largest decline in available spaces in August, thanks, in part, to Rocket Fuel’s 55,000-square-foot lease at 100-126 West 33rd St., which dropped the availability by 60 basis points to 12.6 percent.

According to Persichetti, out of the 17 submarkets, Grand Central had a positive month as far as absorption goes, and availability has dropped a bit, but it hasn’t been performing as well as the others, as buildings don’t cater to creative-type tenants who want to be in the area.