Downtown posts strongest performance of year

Real Estate Weekly, Sept 14, 1994

The Midtown office market, avoiding the traditional summer slowdown in July, experienced over one million square feet of leasing activity for the sixth month in a row. More significantly, rental rates are once again on the rise, and available space has remained relatively stable, according to Edward S. Gordon Company's President Stephen B. Siegel.

July leasing velocity totalled 1.5 million square feet in Midtown - nearly triple the leasing velocity for July of 1993. For the year, leasing velocity climbed to 9.7 million square feet, with the Sixth Avenue/Rock Center segment setting the pace.

Overall, Midtown's availability rate inched up 0.1 point last month to 14.7 percent, due largely to the return of 706,000 square feet of available space in the Fifth Avenue/Madison segment. Conversely, Park Avenue led Midtown last month with the absorption of more than 343,000 square feet.

Average asking rents in Midtown showed their largest one month increase in July (43 cents) in three years. At $31.89 per square foot, asking rents are now up 2.5 percent since year-end. Park Avenue, for the second month in a row, commanded the highest asking rent in Midtown ($43.40).

"The Midtown market is on a fast track to recovery," noted Siegel. "There has been a 26 percent surge in leasing velocity this year and at the present pace, leasing velocity will exceed 17 million square feet this year for the first time since the mid-1980s."

Downtown Posts Best Performance of 1994

July was the fourth consecutive month of positive net absorption for Downtown Manhattan, with availability rates decreasing in all three market segments (Financial, World Trade Center/World Financial Center, City Hall/Insurance).

The Financial segment, the weak point for Downtown market for most of this year, accounted for the lion's share of activity over the past month. More than 80 percent of July's 557,000 square feet of leasing occurred in this segment, paced by Daiwa Securities' lease for 160,000 square feet at Financial Square. For the year, leasing velocity climbed to 2.3 million square feet.

"This year has been the strongest for the Downtown market since the turn of the decade," said ESG's Executive Director Raymond T. O'Keefe. "If Downtown finishes the year on the same path it is headed, 1994 will be the first year of positive net absorption since the 1980s - the strongest signal yet of a recovery in this market."

Positive net absorption Downtown for July totalled 148,000 square feet, with the Financial segment responsible for the absorption of 117,000 square feet. For the year, total absorption stands at 134,000 square feet, compared with the 600,000 square feet of negative absorption recorded for the same time last year.

Average asking rents in Downtown in July stood at $26.70, a 15-cent decrease from last month. The World Trade Center/World Financial Center segment commanded the highest asking rent ($37.90).

Recovering Continues in Midtown South

In the first seven months of 1994, Midtown South's leasing velocity exceeded the total activity for all of 1993. Meanwhile, in July, available space decreased for the 10th month in a row.

In Midtown South as a whole, July leasing velocity totalled 423,000 square feet - the highest monthly level in five years. For the year, leasing velocity climbed to 1.9 million square feet and three Midtown South segments have already surpassed 1993's full year total - Park Avenue South, Hudson Square and Chelsea.

Strong leasing contributed to the absorption of over 290,000 square feet last month, knocking the availability rate down 0.8 points to 13.1 percent. For the year, over 1.4 million square feet has been absorbed in the Midtown South market, with the Park Avenue South/Madison Square segment accounting for over 400,000 square feet. Average asking rents remained stable in July at $16.30 per square foot. This is a 50-cent increase over asking rents for the same time last year. The Noho/Soho segment, for the second month in row, commanded the highest rent.

"Over 2 million square feet of space has been absorbed in Midtown South since this market began to turn in August 1993," said Siegel. "The recovery of Park Avenue South over this time frame has been particularly outstanding. This segment has seen its available supply cut from 13 to 8 percent in the past year and it has the additional distinction of being the first segment in Manhattan to reach equilibrium."