Q3 Manhattan Rents Drop 5%

A 5.2% drop this last quarter (to an avg of $51), combined with the previous three puts the year-over-year drop in Manhattan rents at some 27%, according to Studley.

The amount of available sublease space is over 17 million square feet, with overall vacancy at 13.2%. The total office market in Manhattan is roughly 75 million square feet.

The positive is that the drop in rents, coupled with aggressive incentives (TI’s, free rent, etc.) has pushed leasing velocity to the highest level since the first quarter of 2008.

What we’re seeing in Manhattan is what we anticipate seeing this last quarter locally. There should be increased leasing velocity happening locally as companies begin to roll off long-term leases, and those on short-term renewals finally begin to come to the realization that the world hasn’t come to an end, the cuts they’ve made are likely behind them, and they begin to feel comfortable enough to make longer term commitments.

The negative of course is that we haven’t quite solved the problem of growth, so even though deals will get done, the absorption numbers will likely still prove dismal as companies simply pack up and move elsewhere, or in many cases simply downsize the facility they are in, rather than take down more space. Regardless, we should be hearing of some fairly healthy deals (size wise) getting done this next quarter.

[via Bloomberg]

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