Jones Lang LaSalle reports strong leasing in New York at year-end 2013

Led by the ongoing economic recovery, an easing of corporate caution, continuing growth of creative industries, and strength in the downtown submarket, New York's office market continued to improve in the fourth quarter of 2013. Jones Lang LaSalle reported that Lower Manhattan posted around 10 million s/f in total leasing activity for the year, marking the highest transaction volume since 1998 and the second highest total ever recorded in the submarket. Downtown also recorded 2.75 million s/f of relocations, a 56.7% boost from 2012 and the highest total since JLL began keeping records in 2002. Noteworthy relocations to Lower Manhattan from Midtown included GroupM's commitment to 516,000 s/f at 3 World Trade Center and Jones Day's lease of 330,210 s/f at 250 Vesey St. In addition, Citigroup Inc. will reportedly move its headquarters operations from its longtime home at 399 Park Ave. into the 2.6 million s/f the bank already occupies Downtown at 388 Greenwich St. and 390 Greenwich St. "The year ended with New York enjoying positive absorption, lower vacancy, rising rents and the highest total of annual leasing activity since the financial crisis," said Tristan Ashby, director of research for JLL's New York tri-state office. "Although market indicators were healthy for both the final quarter of 2013 and the year as a whole, difficulties faced earlier in the year indicate that the city is still recovering from the economic downturn. Perhaps the most encouraging sign that the market has turned the corner, however, was Manhattan leasing activity, which was already on track to best 2012 and was then driven even higher by a rush of large leases downtown. Strong leasing activity from tenants looking for value deals remained the theme throughout 2013." Downtown's overall vacancy rate fell to 12.7% this quarter, a decrease of 7.3% (or 1.0%age points) from 13.7% in the third quarter of 2013. The submarket's class A vacancy rate dropped to 14.3% at year-end 2013, a decrease of 7.7% (or 1.2%age points) from 15.5% the previous quarter. Overall average asking rental rates downtown rose to $50.19 per s/f this quarter, an increase of less than 1% from $49.91 per s/f in the third quarter of 2013. Lower Manhattan's Class A rents grew to $54.77 per s/f at year-end 2013, an increase of less than 1% from $54.63 per s/f the previous quarter. Strong leasing throughout much of the city in the final quarter of the year and fewer large blocks of space returned to the market helped New York post falling vacancies in just about every building class and submarket. Manhattan's overall vacancy rate fell to 11.1% this quarter, a decrease of 5.9% (or 0.7% age points) from 11.8% in the third quarter of 2013. The city's class A vacancy rate dropped to 12.1% at year-end 2013, a decrease of 6.9% (or 0.9% age points) from 13.0% the previous quarter. Building owners raising rents at the top of the market and the removal of cheaper sublease space helped push up average asking rental rates in just about every building class and submarket in the city. Overall average asking rents in New York rose to $61.81 per s/f this quarter, an increase of 1.1% from $61.11 per s/f in the third quarter of 2013. The city's class A rents grew to $68.83 per s/f at year-end 2013, an increase of 1% from $68.13 per s/f the previous quarter. Midtown In Midtown, activity in buildings at the top of the market returned to pre-recession levels, driven primarily by a rising stock market. This trophy segment of the market, populated largely by hedge funds, asset management and other financial service firms, is directly tied to Wall St.'s performance more than any other in the city. Space users signed 80 transactions with average asking rental rates north of $100 per s/f in 2013, compared with 51 such deals in 2012. Midtown's overall vacancy rate fell to 11.1% this quarter, a decrease of 5.9% (or 0.7% age points) from 11.8% in the third quarter of 2013. The submarket's class A vacancy dropped to 11.7% at year-end 2013, a decrease of 7.1% (or 0.9%age points) from 12.6% the previous quarter. Overall average asking rental rates in Midtown rose to $67.65 per s/f this quarter, an increase of 1.3% from overall rates of $66.79 per s/f in the third quarter of 2013. The submarket's class A rents grew to $75.38 per s/f at year-end 2013, an increase of 1.4% from $74.36 per s/f the previous quarter. Midtown South After an extended run as one of the nation's hottest office submarkets, Midtown South saw a sharp decline in activity over the past few months. The area has few large blocks of space remaining available and activity is expected to remain focused on renewals. Midtown South recorded just one lease exceeding 100,000 square feet this year — AppNexus' 220,000 s/f renewal and expansion at 28-40 West 23rd St. — compared with seven in 2012. Midtown South's overall vacancy rate fell to 8.4%, a decrease of 1.2% (or 0.1% age points) from 8.5% in the third quarter of 2013. The submarket's class A vacancy rate fell to 6.1% at year-end 2013, a decrease of 9% (or 0.6%age points) from 6.7% the previous quarter. Midtown South was the only submarket in the city to post a drop in class A average asking rental rates in the final quarter of the year, although this decrease came about primarily due to the removal of more expensive space from the market. Overall average asking rental rates in Midtown South rose to $57.88 per s/f this quarter, an increase of almost 1% from overall rates of $57.52 per s/f in the third quarter of 2013. The submarket's class A rents ticked down to $74.58 per s/f, a decrease of less than 1.0% from $75.06 per s/f the previous quarter.