Manhattan office vacancies tick up in Q3-Cushman
* Q3 vacancies rise to 10.9 percent from 10.8 pct in Q2
* Effective rents off 47 pct from Q1 2008 high
By Ilaina Jonas
NEW YORK, Oct 5 (Reuters) - The Manhattan office vacancy rate edged up in the third quarter, and rents continued to decline, as companies like Goldman Sachs Group Inc (GS.N) ended their leases adding more empty space Downtown, real estate services company Cushman & Wakefield said on Tuesday.
Still, the market seems to be bottoming. The vacancy rate in the Midtown market, the largest office market in Manhattan, fell as tenants sought to lock in seemingly rock-bottom rents, Cushman said.
"If you're a tenant and you're doing a lease now, you're not going to look bad to your boss," Dale Schlather, executive vice president, Midtown, said during a presentation on Tuesday. Schlather represent tenants.
The effective rent, which factors in months or even years of free rent plus landlord contributions for interiors, is off 47 percent from its high in the first quarter 2008, Cushman said. Asking rent, the sticker price before concessions, has fallen 23.1 percent.
Asking rent for Manhattan office space averaged $53.80 per square foot in the third quarter, down from $54.31 per square foot at the end of the second quarter, Cushman said.
Average asking rent in Midtown, the largest Manhattan office market, was $61.69 per square foot, up from $61.66 at the end of the second quarter, Cushman said.
The overall Manhattan vacancy rate at the end of September was 10.9 percent, up from 10.8 percent at the end of June, as more than 2 million square feet of space was added to the market. Goldman Sachs accounted for 1.5 million square feet of that. As part of its consolidation into new headquarters that it owns, Goldman vacated 85 Broad Street.
Earlier on Tuesday, real estate research firm Reis Inc said its data for New York office property showed vacancies fell to 11.3 percent from 11.6 percent in the second quarter. [ID:nN04138676]
Reis' data includes 1,328 buildings, while Cushman says it tracks 1,405.
According to Cushman, the Downtown Manhattan vacancy rate rose to 12.1 percent at the end of September, up from 9.9 percent at the end of the second quarter, Cushman said.
In Midtown, the largest Manhattan market, the vacancy rate fell to 11 percent from 11.5 at the end of June, and in Midtown South it edged down to 9.2 percent from 9.3 percent.
Investors also returned to the Manhattan market, while a dearth of construction loans cut the supply of new buildings often sought by the financial sector and other high-rent paying tenants, Cushman said.
This lack of supply could fuel a spike in rental rates in the next two to three years when the vacancy rate falls to 9 percent or below, and moderate job growth continues, said Josh Kuriloff, vice chairman Midtown.
Sales of buildings over $10 million reached $9.4 billion in the first nine months of the year, compared with $3.5 billion for all of last year. But that is only about a third of the annual average of $27.9 billion from 2004 through 2008, Cushman said.
Among the largest Manhattan office owners are SL Green Realty Corp (SLG.N), Vornado Realty Trust (VNO.N), Brookfield Properties Corp (BPO.TO) and Boston Properties Inc (BXP.N). (Reporting by Ilaina Jonas; Editing by Tim Dobbyn)
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