The number of lease deals signed for space in Manhattan increased in the second quarter of 2012, compared to the first three months of this year. According to research by Jones Lang LaSalle, transactions for a total of 2.7 million sq ft of space were completed between April and June, with the president of the firm's New York office Peter Riguardi explaining many large companies decided to "lock in renewals at current pricing". Although the volume of transactions increased, vacancy rates, rental costs and absorption saw little movement.
A report from Cushman & Wakefield had similar findings, noting new leasing activity stood at 11.1 million sq ft at the end of the first half of this year, with renewals accounting for 6.8 million sq ft of this space. The organisation highlighted the Midtown South district as one of the most robust, not only in Manhattan but in the US as a whole. According to its research, offices in this area of the city have a vacancy rate of 6.1 per cent, while it was the only submarket to post rental increases in the second quarter of this year.
Mr Riguardi offered an explanation as to why Midtown South has put in such a strong performance: "Demand from technology and creative companies continues to drive up rents in Midtown South, causing the spread between Class A rents in Midtown and Midtown South to narrow." Senior economist and senior managing director at Cushman & Wakefield Ken McCarthy stated the Midtown South market has now become the most popular district for businesses seeking office space following an economic downturn. He added the market has become "so tight" firms are exploring opportunities in Downtown and lower Midtown as well.
However, there are indications that large organisations are changing their approach and looking into commercial property investment opportunities, alongside leasing office space. This is the opinion of Cushman & Wakefield executive vice-president and head of corporate finance and investment banking Michael Rotchford, who said: "Large corporate users of real estate are looking at ownership in addition to leasing opportunities in Manhattan because real estate capital costs exceed corporate capital costs by a wide margin."
- Friday 13 July 2012