Manhattan’s commercial real estate market continued to move towards stabilization, as leasing activity increased further from the already positive trend of Q1. Total vacancy fell .1% to 12.6% overall. Manhattan outpaced most urban markets as fundamentals rose. Quantifiable job growth for the past five months, especially in the financial sector, bolstered demand for office space and drove absorption to the plus side by 817,628 SF.

Uncertainty remains, amid considerable economic concerns including the effects of just signed financial reform, and the fact that asking rents slid in all submarkets from $49.55 to $48.98 overall. While rents may not have reached bottom, the rate of decline has slowed. The ownership of the city’s top properties such as The Seagram Building, Lever House and 9 West 57th Street, increased asking rents, some for the second time this quarter, and many of these prominent assets are now virtually fully leased. Historically, premier spaces have served as leading indicators for the overall market.

Statistics provide supporting evidence of a recovery underway in NYC. Yet even as Trophy and Class A buildings recovered, asking rents in Class B buildings remained mostly flat as some owners lowered prices to lure tenants.

Midtown was the strongest submarket this quarter, followed by Midtown South, as Downtown struggled to find statistical footing for recovery. This quarter’s overall numbers were influenced by several large Midtown deals including Proskauer Rose taking a large block of new space. Sublet space is also being absorbed at a faster clip, and fewer large blocks came available in Q2. Bargain hunting led small and midsized tenants to take advantage of pricing opportunities.

Sales activity also strengthened, as more arms-length transactions were completed. Midtown led the city in large building sales. The city’s largest landlord, SL Green, completed two tower acquisitions at 600 Lexington and 125 Park Avenue, and sold its 45% stake in 1221 Avenue of the Americas to the Canadian Pension Plan Investment Board. Sales activity was supported by strengthening in capital markets and strong demand for the better assets.

-Henry Goodfriend

Henry Goodfriend is an Executive Vice President of Operations in NAI Global’s New York City office.