Office Vacancy Rate Falls to 11.4%, Lowest in 2 Years

Manhattan’s office vacancy rate slipped to 11.4% at the end of the third quarter, marking its lowest level in more than two years, according to a new study by real estate brokerage firm Cushman & Wakefield.The report, released yesterday, showed the vacancy level fell to 11.4% from 11.8% at the end of the second quarter and 12.5% a year ago.Asking rents stood at $40.51 a foot on average, down from $50.56 in the second quarter, but up from $40.39 a year earlier.Downtown Manhattan also showed improvement. Its office vacancy rate fell to 12.7% at the end of the third quarter – its lowest level in over a year, the report said. The downtown NYC vacancy rate was 13% a year ago and hit a five-year high of 13.5% at the end of 2003.However, rents have not fared as well. Asking rents in downtown Manhattan ticked down to $32.16 a foot on average, from $32.25 in the second quarter and $35.60 a year ago.In Midtown, the vacancy rate was 11% at the end of the third quarter, down from 11.3% in the second quarter and 11.9% a year earlier. Asking rents averaged $47.04 a foot, down from $47.16 in the second quarter, but up from $45.63 a year ago.“It’s truly remarkable, considering where we’ve been in the not-too-distant past,” said the executive managing director at Cushman & Wakefield, Ken Krasnow, in a note. He said the market’s health “defies expectations.”He said leasing trends bode well for Manhattan going into 2005. “Financial services firms are back in a big way, eclipsing law firms as the most active industry in the market this year,” he said.So far this year, financial services firms have leased more than 2.6 million square feet of space while law firms have snapped up 2.2 million square feet.He said downtown Manhattan will likely be challenged by large blocks of space, including about 800,000 square feet by Chase and 7 World Trade Center, which will be marketed. Still, Mr. Krasnow expects Downtown NYC to continue to improve, “based largely on record rent differentials between midtown and downtown.” Indeed, downtown Manhattan office space is currently being marketed at about a $15 a foot less on average than midtown space.

Office Vacancy Rate Falls to 11.4%, Lowest in 2 Years

Office Vacancy Rate Falls to 11.4%, Lowest in 2 Years

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