Press Release brought to you by Colliers International

Colliers Q4 Report: Manhattan Office Market Ends With A Bang


--2013 leasing totals reach 33.9 msf, with overall market on upswing, but gaps in recovery, financial sector retrenchment, suggest more modest levels in 2014--

NEW YORK, JANUARY 6, 201– The Manhattan office market ended 2013 with a flurry of activity, bringing the yearly leasing total to 33.9 million square feet, Manhattan’s highest level since the market’s previous peak in the 2005-2007 time frame, according to new research from Colliers International.The fourth quarter alone saw an unusually high level of leasing, at 13.1 million square feet, with the overall market supported by a solid business sector, near-record property values, and major leases signed in Lower Manhattan just as the quarter ended.

However, sustained but moderate employment growth and continued retrenchment in the financial activities sector suggest that a repeat of the 2013 leasing totals may be a challenge for next year despite the property market’s overall upswing. 

All three of Manhattan’s major markets recorded high activity levels, with Midtown North at 4.9 million square feet, Midtown South at 2.2 million square feet, and Downtown producing an uptick to 5.9 million square feet. The average quarterly rate for the last three quarters of 2013 was 9.7 million square feet, well above the quarterly Manhattan average of 6.2 million square feet sustained over the previous five years. The 33.9 million square feet was 42.4 percent higher than the 23.8 million square feet recorded in 2012.

In addition, Manhattan saw overall increases in average asking rents to $60.41/sf in the fourth quarter, up from $59.14/sf in the third quarter and $56.13/sf in the fourth quarter of 2012. This increase was driven largely by continued gains made in Midtown South and a more moderate increase Downtown. The average asking rent was also up in Midtown North, but the gain was the weakest of the three major Manhattan markets.

Midtown North’s average asking rent increased to $69.73/sf, up slightly from $69.36/sf in the third quarter and 4.6 percent from $66.66/sf in the fourth quarter of 2012. Rent in Midtown South continued its unabated upward trend. The overall Class A average asking rent reached $64.52/sf, up 4.8 percent at an annual rate from $63.75/sf in the third quarter and 17.7 percent from $54.82/sf in the fourth quarter of 2012. The average asking rent for class B space in Midtown South reached $55.05/sf, up 16.4 percent at an annual rate from $52.88/sf in the third quarter and up 16.2 percent from $47.37/sf year-over-year.

The average Downtown asking rent increased in the fourth quarter to $48.60/sf, up 1.0 percent from $48.48/sf in the third quarter. Class A average asking rents reached $51.62/sf, up from $48.87/sf in the third quarter and 9.6 percent from $47.09/sf in the fourth quarter of 2012. The Class A rents are trending up as more expensive space in the new World Trade Center becomes available for leasing.

Despite these overall market improvements, with Manhattan property values at or close to all-time highs, the year-end leasing totals were somewhat skewed by several large renewals and sale leasebacks over the past few quarters, including  those for Sony, JP Morgan Chase, Citibank, and CME Group Inc. While these transactions are large on their face, they actually demonstrate further signs of retrenchment in the financial sector and corporations in general.

“The fourth quarter ended with a flurry of major leases, pushing us to a yearly total we haven’t seen since the peak of the market,” said Joseph Harbert, President of the Eastern Region for Colliers International. “But with an uneven recovery we need to be cautious in our 2014 projections. We expect to see continued overall improvements in the year ahead, and though repeating these 2013 totals will be a challenge, the market does seem to be gaining sustainable momentum.”

Additional highlights from Colliers International’s’ fourth quarter report:

  • The overall Manhattan availability rate dropped to 11.3 percent, down from 11.5 percent in the second quarter and 12.3 percent in the fourth quarter of 2012.
  • The Midtown North availability rate fell to 11.3 percent, down from 11.6 percent in the third quarter and 12.4 percent in the fourth quarter of 2012. Midtown South’s availability rate held steady at 9.1 percent quarter-over-quarter, but increased modestly from 8.6 percent in the fourth quarter of 2012. Downtown’s availability rate declined to 14.3 percent, down from 14.7 percent in the third quarter and 15.6 percent in the fourth quarter of 2012.
  • The overall Manhattan vacancy rate remains low by national or regional standards at just 5.4 percent, although it increased from 5.3 percent in the third quarter of 2013 and 4.1 percent in the fourth quarter of 2012.
  • Through November, total employment in New York City was up 1.9 percent over the 2012 average for its first eleven months, with employment continuing to show positive growth in consulting, computer systems design, advertising, and higher education. The economic base of New York City has become broader and likely more stable. However, nagging concerns persist about the financial sector.


Active Investment Sales Market

Office sales that closed in 2013 reached $18.4 billion total, comprised of 58 transactions each exceeding $5 million. The aggregate value is only exceeded by the 2007 total, at $30.3 billion. Class A property sales in 2013 totaled $15.4 billion, averaging $699/sf. This year-end average price for Class A properties is far below the $900+/sf figure computed for the first three quarters, lowered by several properties which closed in the fourth quarter Downtown and in some of the less prominent Midtown North submarkets. But the news is still quite positive.

For example, One Chase Manhattan Plaza sold for $330/sf Downtown, while 825 Eighth Avenue and 605 Third Avenue both sold in Midtown North in the mid-to-high-$600/sf range. These prices all represented strong returns, but they reduced the overall price psf. Finally, to show that prices in the fourth quarter didn’t weaken, a 45 percent interest in 7 Times Square sold for a reported $1,216/sf.


Colliers International is a global leader in commercial real estate services, with over 13,500 professionals operating out of more than 482 offices in 62 countries. A subsidiary of FirstService Corporation, Colliers International delivers a full range of services to real estate users, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, mortgage banking and insightful research. The latest annual survey by the Lipsey Company ranked Colliers International as the second-most recognized commercial real estate firm in the world.

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01/06/2014 - 10:50


Colliers International

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