Manhattan Office Leasing Up 34% From First Half of 2010, CB Richard Says
Manhattan office leasing is up 34 percent from last year as deals for large blocks of space helped drive down the availability rate, according to CB Richard Ellis Group Inc. (CBG)
Almost 15.7 million square feet (1.46 million square meters) of leases were completed in the first half of the year, or 4 million more than the same period in 2010, the world’s biggest commercial real estate services firm said in a report today. Agreements by Conde Nast Publications Inc. and law firm Morrison Foerster LLP to anchor new buildings at 1 World Trade Center in lower Manhattan and 250 West 55th St. in Midtown, respectively, were among the biggest deals.
Companies such as Google Inc., lured by New York’s young and creative talent pool, are setting aside concerns about a lagging national economy to enter and expand in the market, Peter Turchin, CB Richard Ellis’s executive vice president, said in a telephone interview.
“You’re seeing New York as a place where almost every company is saying we have to be in, and a market we can’t avoid,” he said. “If we want to recruit the best and the brightest, those people are in New York.”
Google, the Mountain View, California-based owner of the world’s most popular search engine, agreed in December to pay $1.8 billion for 111 Eighth Ave. to expand its New York base of operations.
Rebound in Demand
A rebound of the New York City’s financial industry from the 2008 credit crisis has helped drive demand for office space. The city’s unemployment rate was 8.6 percent in May, its lowest point in more than two years and below the national average of 9.1 percent that month, the state Department of Labor said on June 16.
Manhattan’s office availability rate, defined as all space being marketed for occupancy within the next 12 months, was 11.3 percent at the end of June, down from 14 percent a year earlier, Los Angeles-based CB Richard Ellis said. The average rent sought by landlords rose 9.1 percent to $51.93 a square foot.
Conde Nast, publisher of Vogue, the New Yorker and 16 other magazines, agreed in May to move from its Times Square headquarters in Midtown to about 1 million square feet at 1 World Trade Center, slated for completion in 2013.
Also in May, Morrison Foerster signed a deal to rent 180,000 square feet at 250 West 55th St. The agreement prompted developer Boston Properties Inc. (BXP), the biggest U.S. office real estate investment trust, to resume construction of a skyscraper at the site.
Lower Manhattan
Office availability in lower Manhattan declined in seven of the last eight months, to 11.3 percent in June, according to CB Richard Ellis. Asking rents increased 2.2 percent from a year earlier to $39.11 a square foot.
The firm’s data don’t include the 2.92 million square feet at the World Financial Center listed for rent by landlord Brookfield Office Properties Inc. Bank of America Corp. (BAC) decided last month to retain only a fraction of the space it inherited when it bought Merrill Lynch & Co., and subtenant Nomura Holdings Inc. agreed to move its headquarters to Midtown. The leases expire in 2013.
Demand for offices at the World Trade Center and World Financial Center is so strong that “the majority of that space will never hit the market, meaning it will never be statistically listed,” Turchin said.
Newer Buildings
Downtown, still recovering from the destruction of the twin towers almost 10 years ago, is on the verge of becoming the market of choice for renters seeking the most technologically advanced offices, Turchin said. About 35 percent of the area’s buildings will be less than 35 years old in 2015, compared with 24 percent in Midtown. Almost 13 percent will be less than 15 years old, compared with 7 percent in Midtown.
CB Richard Ellis represents developer Larry Silverstein on leasing 4 World Trade Center, a 2.3 million-square-foot skyscraper, and 3 World Trade Center, an adjacent 2.8 million- square-foot tower, both in progress at the Ground Zero site.
To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net
To contact the editor responsible for this story: Kara Wetzel in New York at kwetzel@bloomberg.net
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