NEW YORK (Reuters) - Leasing activity in the third quarter for office space in Manhattan dipped below a 10-year rolling average for the first time since 2013, a crack in an otherwise robust commercial real estate market, Colliers International Group Inc CIG.TO said on Wednesday.
The asking rate for rents is at record highs and property sales are poised to set an annual record, while the availability rate for office space fell to 9.7 percent, the lowest for all of Manhattan in seven years, Colliers said.
“We’re definitely in a landlord’s market with the availability rate where it is now,” Joseph Harbert, president of the eastern region at Colliers, said at a media briefing.
Harbert said it was a very vibrant market, especially for space between 15,000 and 75,000 square feet.
The price of asking rents for all Manhattan surpassed $70 a square foot for the first time since 2008, considered the peak of the city’s commercial real estate market.
Another sign of a tightening market includes the amount of space that is leased, known in the industry as absorption, which slipped from year-ago levels but remains strong as technology, the so-called TAMI sector, continues to drive demand.
Technology, advertising, media and information accounted for the largest share of leasing, at 34 percent in the third quarter, immediately followed by the more traditional financial services and insurance.
TAMI is fueling rental growth, especially in the Midtown South section below 34th Street, where rents have surged almost 80 percent since the trough of the Great Recession in 2009 and are likely poised to reach $100 a square foot, Harbert said.
Midtown South is so hot, prices for the best century-old brick and mortar buildings in the area are nearing those of Class A glass and steel buildings in Midtown.
Private equity funds continue to cash out, accounting for more than half of sales during the quarter, a sign of a top in the market but also that the life span of their funds has ended. Foreigners, after private equity, make up the lion’s share of the buyers of buildings.
Reporting by Herbert Lash; Editing by Steve Orlofsky