Rising Rents for Manhattan Office Space May Weaken

The days of escalating rents for Manhattan office space could be nearing a close, as the commercial leasing market is showing some signs of weakening, new reports by brokerage firms suggest. Between July and September, leasing activity was down 28% for Class A office space compared with a year earlier, according to a quarterly report by Cushman & Wakefield.

The numbers suggest companies are expanding and changing locations with less frequency, approaching large decisions with a newfound sense of caution, brokers said.

"To a large degree, people are holding their breath," a vice president at the commercial brokerage firm Studley, Steven Coutts, said of the impact from the credit crunch.

Despite this pause, office rents climbed to new record highs, hitting an average of $75 a square foot for Class A space, while vacancy rates dropped to 5.4%, the lowest point in several years, according to Cushman & Wakefield. The rent levels— which climbed past $150 a square foot on nine deals this quarter — represent a dramatic jump from a year ago, when the going rate in Manhattan was about $54 a square foot.