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Cushman and Wakefield
New York Metro Region
Joseph R Harbert
New York Commercial Property
Above expected employment growth is fuelling what could be called a mini-boom in the New York office sector, particularly in Manhattan. According to Cushman and Wakefield, Manhattan office rent hit $58.90 at the end of March, an increase of 7.6% on March 2010. The three major submarkets: Midtown, Midtown South and Downtown also saw rents grow, by 1.9%, 5.6% and 0.8% respectively during the period.
The growth flies in the face of a slowdown in overall leasing activity. In Q1 a total of 5.8 million square feet was leased out, a drop of 24% from the 7.6 million square feet leased in the final quarter of 2011. However, the slowdown follows a period of massive growth culminating in Manhattan office leasing reaching its highest point since 2000, with 30.1 million square feet of new leasing activity in 2011.
"In 2011 we saw three quarters of strong leasing activity followed by a soft fourth quarter," said Joseph R. Harbert, Cushman & Wakefield's Chief Operating Officer for the New York Metro Region. "We're seeing a continuation of that sluggishness into 2012, but expect the second half of the year to be stronger. Even so, we've seen asking rents increase over each of the submarkets, while the vacancy rate has remained flat."
The overall vacancy rate for commercial property in Manhattan stood at 9.1% at the end of Q1. Midtown South led the way with a big drop in its vacancy rate to 5.9% to end the first quarter, down from 6.4% in Q4 2011. Cushman and Wakefield put this down to its becoming the preferred location for media and tech companies on the east coast, giving birth to its nickname of Silicon Alley. The class-A vacancy in Midtown South stands at only 4.6 percent.
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