2012 1st quarter leasing report: The Manhattan office market continues to be positive!

The first three months of 2012 have come to a close and the Manhattan office market continues to be positive. Locations that were secondary markets for many years, where tenants could move to get a slightly better deal, have become primary markets now. The Flatiron and Park Ave. South districts along with the "Meatpacking" district remain the hottest markets in the city with a seven block section of Park Ave. South between 16th and 23rd Sts., perhaps the tightest market in the country with just eight spaces available within the 2,000 s/f to 10,000 s/f range direct from a landlord. The Midtown and Plaza districts have direct and sublet space coming on and off the market. This makes for a rather stable market, absorption moving slightly positive or negative on a monthly basis. This is remarkable considering that several large sublet spaces have recently come to market, the most recent, 100,000 s/f from Citibank at 485 Lexington Ave. A seven block survey of Fifth Ave. office space from 50th St. to 57th St. within the 2,000 s/f to 10,000 s/f range yields 77 spaces available of which six are available to sublet. Leading the charge are the technology related firms. With New York State continuing to provide incentives to attract computer tech research firms to the Albany region from around the country and mayor Bloomberg vowing that New York City would become "more dynamic than Silicon Valley," attracting technology tenants and the related firms, digital, social networks, incubators, finance, marketing, etc. are the single most active industry currently seeking office space. In general, rents are rising slightly with landlord incentives remaining constant. The disparity perhaps lies in the way that tenants expect to receive space from their prospective landlords and the way in which landlords want to deliver space to their prospective tenants. Most tenants would prefer to have space built to their requirement while most landlords will build to a certain "capped" improvement allowance or prefer to provide a contribution towards a tenant's build out. Landlords willing to pre-build space have the advantage as pre-built offices continue to attract tenants who do not want to take on the added responsibility of "building their own space." At Murray Hill Properties, our agents at 1180 Ave. of the Americas and at 1250 Broadway see this first hand and are producing terrific pre-built units and experiencing excellent activity. All of this is relatively good news for our country considering the continuing onslaught of difficult financial news emanating from Europe (struggling economies) and the Far East (impending financial slowdowns) and the government upheavals in the Middle East. All of the usual indicators point to a continued reliance on parking cash and securities in America for safety's sake, a flight to quality. This makes for a nerve-racking financial market for many and it demonstrates the continued confidence that investors and professionals have in New York, as Manhattan continues to lead the U.S. market to lower vacancy rates and higher rents as this country's most important business market. The continued "slow but consistent" upswing in the New York real estate market and the continued loosening of the credit markets has finally set in motion some new development of buildings. Though much of this "new office space" won't be delivered for several years, perhaps 2016, the fact that we are now beginning to see operating cranes in the sky is a positive sign. The Hudson Sq. market bears watching as several larger leases have been signed recently and may indicate that this is a market that tenants are beginning to consider as transportation expands and our existing property inventory declines. After all, hotel and residential conversions continue to use up office building inventory and no new significant properties will come to market until 2015 and beyond. David Greene is the president of brokerage services at Murray Hill Properties LLC, New York, N.Y.