The Manhattan office market continued to gain momentum in the third quarter, as all market indicators are heading in the right direction. Demand remains strong, as another 1.3 million s/f of positive absorption was recorded in the third quarter, bringing the 2013 total to 1.9 million s/f. One of the main reasons is the demand for big blocks of space. In the first quarter, there were 83 blocks of available contiguous space,100,000 s/f and greater, but an increase in activity has pulled that number down to 68. The availability rate dropped 20 basis points to 11.2%, its lowest level since 2008. Asking rents continue to climb, however class B rental increases are still out-pacing class A. Class B average asking rents soared another $2.50 per s/f to $53.28, while class A rents went up only $0.68 to $69.97 per s/f.
Midtown followed its strong second quarter with a modest third quarter, as the availability rate dropped 20 basis points to 11.2%. Demand has picked up in Midtown over the last six months and another 393,426 s/f of positive absorption occurred in the third quarter. Overall average asking rents are up $0.80 per s/f to $70.62.
Even with the addition of a new 400,000 s/f building at 51 Astor Place to Midtown South's inventory, the availability rate remains below 9% in the tightest of the three Manhattan markets. Despite this causing a third quarter rise in availability by 40 basis points to 8.7%, overall average asking rents jumped $3.60 per s/f to $62.92.
Downtown posted a strong third quarter, as the availability rate dropped 110 basis points to 13.5%. Asking rents downtown remained stable in the third quarter as the overall asking rent edged up $0.44 to $47.74 per s/f. With downtown pricing discounted compared to Midtown and Midtown South, it remains a value option for tenants with 94 tenants moving south of Canal St. since January 2012.
Richard Persichetti is VP, research, marketing, and consulting of Cassidy Turley, New York, N.Y.
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