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Manhattan office vacancy hits 15-year high-report

* Class A Midtown vacancy rate reaches 15-year high

* Overall Manhattan vacancy rate hits 13.1 percent

* Class A Midtown asking rents fall nearly 11 percent

NEW YORK, July 2 (Reuters) - The vacancy rate for top quality Midtown Manhattan office buildings reached its highest level in 15 years and asking rents fell nearly 11 percent in the second quarter, a Jones Lang LaSalle JLL.N report said.

Midtown Class A office space, which commands the highest rents and whose demand is driven by the financial industry, saw vacancy rates reach 15 percent at midyear 2009, up from 13.5 percent at the end of the first quarter, Jones Lang LaSalle said in a report released on Wednesday.

Vacancies have more than doubled from a low of 7.2 percent in December 2007, the report said.

“In addition, as the second quarter of 2009 drew to a close, there was a noticeable increase in activity throughout Manhattan, offering a positive harbinger of what may be in store for the remainder of the year,” James Delmonte, vice president and director of research, said in a statement.

The average asking rent for Class A Midtown space fell by a record 10.8 percent to $73.10 per square foot at the end of the quarter.

Earlier this week, real estate services firm FirstService Williams also said that the deterioration of the Manhattan office market slowed at the end of the second quarter.

The overall Manhattan vacancy rose to 13.1 percent from 11.9 percent at the end of the first quarter. Asking rents were off 7.9 percent.

For less pricey Class B Midtown buildings, the vacancy rate climbed to 13.2 percent at the end of the quarter, from 11.7 percent in the previous quarter.

The average asking rent in Midtown fell 10.8 percent to $73.10 per square foot at the end of the quarter. Class B building asking rents fell 6 percent to $50.91.

Downtown Manhattan’s overall vacancy rate rose to 10.8 percent from 10.3 percent at the end of the first quarter. For Class A Downtown space, vacancies rose to 8.8 percent from 8.2 percent.

“Downtown is clinging to a vacancy rate much lower than would be expected, with the Class A vacancy rate remaining technically within equilibrium,” Delmonte said.

But that is not expected to last long as some of the largest tenants in Downtown Manhattan are expected to shed unneeded space. Jones Lang would not identify the renters.

Lower Manhattan posted average asking rental rates of $46.21 per square foot for Class A buildings, down from $48.22 per square foot.

Vacancies decreased in Midtown South Class A buildings to 8.8 percent from 9.1 percent. Average asking rental rates fell 3 percent to $57.61 per square foot. (Reporting by Ilaina Jonas; Editing by Steve Orlofsky)

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