SILICON VALLEY OFFICE REPORT 4Q10
The Manhattan office market continued to tighten during the first half of 2007, extending
strengths exhibited during the second half of 2006. Steady employment growth
contributed to positive absorption of available space and rapidly escalating asking rents.
The New York City economy expanded at a healthy pace during the first six months of
the year, led by strong gains in office-using employment. Data available through the end
of May show that the City has added nearly 16,800 jobs in industries that are key to the
commercial office market, with financial services and professional business services
adding 7,400 and 5,500 jobs, respectively. This resulted in increased demand for office
space in a market that was already the tightest it had been since the first quarter of 2001.
The year began with 26.1 million square feet) available throughout Manhattan. By the
end of June, available space had fallen precipitously to 20.8 a decline of 20.5%.
diminishing availability of space has been the story of the market; April 2007 was the
only month in the past year that did not record a month-to-month decline of at least
As a result, Manhattan’s overall vacancy rate has tumbled to a six
low, closing the mid-year at 5.3%. For the third consecutive quarter, the vacancy rate
closed below equilibrium, defined as a vacancy rate range of 7.0% - 9.0%.
In this environment, it is no surprise that asking rates have skyrocketed. Up 36.2% from
a year ago, Manhattan’s overall total average asking rent closed the first half of 2007 at
another record-high: $59.17 per square foot. Thus far this year, rents have increased by
an average of $1.44 each month since January, breaking the old record set back during
the second and third quarters of 2000. The rapid pace of rental rate growth has extended
throughout Manhattan. In every submarket but one, overall rents have registered
double-digit percentage increases from a year ago. Chelsea, up 4.2%, was the only
On a cautionary note, however, leasing activity throughout Manhattan was slower during
the first two quarters, partially attributable to both significantly higher rents and lack of
available space. With 11.8 leased year-to-
date, 2007 activity trails last year’s total through
June by 5.4%, with Midtown trailing by nearly 20.0%. This suggests that tenants are
possibly beginning to search for lower-priced space in response to landlords hiking up
rents throughout the market.