Midtown & Midtown South post fourth straight quarter of vacancy rate decreases
NEW YORK, NY – January 4, 2011 – (RealEstateRama) — Jones Lang LaSalle announced that vacancy rates fell in all property classes in the Midtown and Midtown South office submarkets during 2010. At the same time, Lower Manhattan posted a slight increase in vacancy rates in all property classes.
“The Manhattan office market finished 2010 as expected with some improvement in the overall vacancy rate, increased leasing activity, positive absorption and little movement in asking rents,” said James Delmonte, vice president and director of research for Jones Lang LaSalle’s New York office. “While the overall picture is easy to summarize, there are mixed signals in submarkets and property types with Downtown lagging behind Midtown and asking rents for smaller, trophy-quality space rising. Also, we’re seeing that activity is being driven by relocations and renewals rather than new demand, which could ultimately lead to flattening absorption early next year.”
Midtown saw vacancy rates for all building classes post a decrease for the fourth consecutive quarter. The overall vacancy rate fell to 12.2 percent in the fourth quarter of 2010, a drop of 2.7 percent from the overall vacancy rate of 12.5 percent recorded in the third quarter of 2010. Class A vacancy rates fell to 12.3 percent this quarter, a drop of 2.4 percent from the Class A vacancy rate of 12.6 percent seen the previous quarter. The submarket’s Class B vacancy rate decreased to 11.9 percent in the final quarter of the year, a drop of 4.4 percent from the Class B vacancy rate of 12.5 percent posted in the third quarter of 2010.
Midtown eked out an increase in average asking rental rates for Class A space this quarter. The submarket’s high-end buildings posted an average asking rental rate of $65.81 per square foot in the fourth quarter of 2010, an increase of 1.2 percent from Class A rents of $65.00 per square foot seen in the third quarter of 2010. Class B buildings in Midtown saw rents of $47.32 per square feet this quarter, a decrease of 1.2 percent from Class B rates of $47.91 per square foot recorded the previous quarter.
“Renewals and relocations drove the majority of activity in Midtown during the year as the number of large blocks returned to the market eased,” said Delmonte. “As a result, absorption levels were positive. It is important to note that several of the new leases signed involved less square footage than prior locations and the space may eventually come to market. If this space does come back to the market in the first half of 2011 and there isn’t sufficient new demand, absorption could fall back into negative territory, essentially wiping away any gains made in 2010.”
Midtown South also posted decreases in vacancy rates in all property classes for the fourth straight quarter. The submarket’s overall vacancy rate dropped to 9.1 percent in the fourth quarter of 2010, a decrease of 2.9 percent from the overall vacancy rate of 9.4 percent posted in the third quarter of 2010. Midtown South’s Class A buildings saw vacancy rates fall to 8.7 percent this quarter, a drop of 4.4 percent from the Class A vacancy rate of 9.1 percent posted the previous quarter. The submarket’s Class B vacancy rate dropped to 9.2 percent in the final quarter of the year, a decrease of 2.7 percent from the Class B vacancy rate of 9.5 percent seen in the third quarter of 2010.
Midtown South’s Class A buildings recorded an average asking rental rate of $47.16 per square foot in the fourth quarter of 2010, an increase of 2.0 percent from Class A rents of $46.21 per square foot in the third quarter of 2010. Class B buildings posted rents of $41.63 per square feet this quarter, a decrease of less than 1 percent from Class B rates of $41.67 per square foot seen the previous quarter.
Lower Manhattan recorded slight increases in vacancy rates in all property types this quarter. The submarket’s overall vacancy rate rose to 12.8 percent in the fourth quarter of 2010, rising 1 percent from the overall vacancy rate of 12.7 percent in the third quarter of 2010. Class A vacancy rates inched up to 10.9 percent this quarter, a boost of less than 1 percent from the Class A vacancy rate of 10.8 percent recorded the previous quarter. Downtown’s Class B vacancy rate rose to 16.3 percent in the final quarter of 2010, an increase of 2.4 percent from the Class B vacancy rate of 15.9 percent posted in the third quarter of 2010.
“Contrary to Midtown, Downtown saw its vacancy rates rise during the year,” said Delmonte. “The increase was due, in large part, to the addition to the market of more than 1 million square feet of space at 85 Broad Street.”
Lower Manhattan recorded decreases in average asking rental rates in all building classes in the final quarter of the year. The submarket’s high-end buildings recorded Class A rents of $40.95 per square foot in the fourth quarter of 2010, a decrease of less than 1 percent from the Class A rate of $41.32 in the third quarter of 2010. Downtown’s Class B buildings posted average asking rental rates of $34.91 per square foot this quarter, a decrease of 2 percent from the Class B rate of $35.64 per square foot posted the previous quarter.
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2009 global revenue of $2.5 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.6 billion square feet worldwide. In the New York tri-state area, Jones Lang LaSalle provides leasing and management services for more than 94 million square feet of commercial real estate on behalf of owners and occupiers in the region. For further information, please visit our website, www.joneslanglasalle.com.
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