By Pat Savage
The cost of office space in Manhattan has finally topped the tallest skyscraper.
CBRE Group, Inc. — the world’s largest commercial real estate services and investment firm with 2018 revenues of $21.3 billion and more than 90,000 employees (excluding affiliate offices) – is reporting that the average rent being asked for office space in Manhattan is now $80.25 per square foot, an all-time high. The report added that landlords are insisting on 9% higher rents than they were at this time in 2018.
“The real estate brokerage said the new high-water mark was driven in part by escalating costs in Midtown South and Downtown Manhattan. Massive towers such as 30 Hudson Yards and 425 Park Ave. also hit the market during the period, each asking for rents well above the borough’s average, CBRE noted,” according to Crain’s New York Business.
“Economic growth in New York City remained strong in the first half of 2019 with office-using employment continuing to surge, spurring ongoing leasing, especially among financial services, technology and advertising/media companies,” Nicole LaRusso, CBRE’s director of research and analysis in the tri-state, told Crain’s.
Transwestern Commercial Services (TCS), the privately held real estate firm, announced that the FIRE (finance, insurance and real estate) sectors were key to the quarter, accounting for 37% of all leasing activity, with the coworking segment representing 10%. “Year-to-date leasing activity stands at 15.5 million square feet, a figure that is down 9% from the same point last year but above the historical mid-year average of 14.8 million square feet,” the company noted in a release.
“As we cross the mid-year point for 2019, we can see the signs for another strong year, with leasing activity well above the mid-year average,” said Danny Mangru, TCS Research Manager. “Meanwhile, we keep seeing new record highs for asking rents, while availability rates drop to points not seen several years. We expect the office leasing levels to continue for the remainder of the year, since we’re seeing activity across multiple industries, not only the hot FIRE sector and coworking segment.”
Additional highlights from the report include:
– Office leasing activity totaled 8.5 million square feet, up 20% from last quarter.
– 26 new leases exceeding 50,000 square feet were signed, including 10 that topped 100,000 square feet.
1.3 million square feet of positive absorption marked the highest second-quarter figure since 2015.
– Average asking rents posted a new all-time high, increasing 2% to $80.37 per square foot.
– Manhattan’s availability rate fell to 10.5%, the lowest level since 2015.
– 12 blocks of space exceeding 100,000 square feet were added to the market. Of those, nine are in Midtown, two are in Downtown and one is in Midtown South.