Rents at Manhattan’s best offices had their biggest drop in more than three years as financial firms postponed making decisions on space until after today’s election, CompStak Inc. said.
Rents for “Class A” space in the the largest and most expensive U.S. office market dropped 7.1 percent in the third quarter from the previous three months, according to the New York-based leasing-data provider. It was the biggest decline since the months following the credit crash, which led to rent cuts in late 2008 and early 2009, CompStak said in a report.
“A lot of financial institutions are leery about making decisions in advance of the presidential election, and also some general unease about the economic climate,” said Michael Mandel, Compstak’s co-founder and chief executive officer.
Class A rents in Manhattan fell to an average of $58.42 a square foot as of Sept. 30 from $62.88 at the end of the second quarter, CompStak said. Unlike reports issued by brokerages, CompStak tracks rents agreed to, including the impact of such concessions as free months, rather than what landlords are seeking.
The report shows that the financial industry, the traditional driver of New York City office rents, is giving way to technology, media and advertising firms. Those firms tend to steer clear of midtown Manhattan’s skyscrapers, preferring the older, low-rise buildings of midtown south, the area roughly between 34th and Canal streets, Mandel said.
Agreements signed by such firms helped push rents for all types of Manhattan office space up 1.2 percent to $49.64 a square foot, CompStak said. Midtown south office rents rose 6.7 percent to $47.98, the sixth consecutive increase. Class B space, generally found in older buildings with less expensive finishes, rose 6.8 percent to $40.12 a square foot.
“The midtown south upturn and the increase in Class B space in general has been enough to offset the significant decline in Class A space,” Mandel said. “It’s been a meaningful trend which has really helped to stabilize the office market in Manhattan.”