Office leasing jumps 84% but vacancy rate climbs as new buildings add space
Manhattan commercial property sales tripled in value in the first quarter from a year earlier as sellers begin to take advantage of rising demand, according to brokerage Cushman & Wakefield.
About US$3.3 billion of transactions priced at US$10 million or more were closed or went under contract, almost matching the US$3.5 billion sold during the whole of last year, the New York-based property broker said on Tuesday.
Deals included UBS AG’s sale of a 49 per cent stake in an office tower at 299 Park Ave and the sale of the former Drake Hotel site at 440 Park Ave.
There’s a ‘large amount of capital focused on Manhattan,’ Joseph Harbert, Cushman’s chief operating officer for the New York region, said in a statement. ‘Fundamentals are also starting to stabilise and investors are taking notice.’
Investors are returning to the New York market on signs of growing demand after the US recession and job losses at financial companies sent rents down 24 per cent from their 2008 peak, according to Cushman. About 529,000 square metres of offices were leased in the first quarter, 84 per cent more than a year earlier.
Eight transactions worth more than US$100 million were completed or agreed to in the first quarter, compared with seven in all of 2009, according to Cushman. While many of last year’s deals were driven by lenders, this year investors are choosing to sell, Mr Harbert said.
He cited 125 Park Ave and 600 Lexington Ave as examples of office buildings whose owners aren’t under pressure to sell. CB Richard Ellis Group Inc is handling those listings, spokesman Phil Russo said.
‘Many properties that are not overleveraged, the owners want to take advantage of the capital that’s been sitting on the sidelines,’ said Richard Baxter, a member of Cushman’s New York capital markets team, which brokers large property sales.
Buyers in the first quarter included Rockpoint Group LLC, a Boston-based global investment management firm, which purchased the stake in 299 Park, and Los Angeles-based CIM Group, which acquired the former Drake Hotel site for US$305 million, according to Real Capital Analytics, a research company that tracks sales in the industry.
Sam Zell’s Chicago-based Equity Residential paid US$181 million for River Tower, a 38-storey apartment house on Manhattan’s East Side, Real Capital data show.
The Manhattan office vacancy rate climbed to 11.6 per cent from 9.6 per cent a year earlier as new construction added supply to the market, Cushman said. The biggest addition was 11 Times Square, a building at Eighth Avenue and West 42nd Street, which has 1.1 million square feet of space that had been under construction, according to the broker.
None of that space has been leased yet, though ‘deals are cooking’ there, Mr Harbert said.
Asking rents slipped to a three-year low of US$55.38 a square foot, compared with US$55.52 in the fourth quarter and US$65.01 a year earlier.
The 5.7 million square feet of offices leased in the first quarter was up 14 per cent from the fourth quarter. In January, Mr Harbert said the market was ‘close to a bottom.’ Average Midtown asking rents rose by 11 cents to US$61.93 a square foot in the quarter. Those rents are down 16 per cent from a year ago. Vacancy rose to 12.6 per cent from 12 per cent at the end of 2009 and 10.5 per cent in last year’s first quarter.
Rents in Midtown South, the area approximately between 30th and Canal streets, fell by 1.8 per cent during the quarter to US$46.32 a foot, and are down 12 per cent from a year ago.
‘People want to be in Midtown,’ Mr Harbert said. ‘We’re seeing that the surge in leasing activity is coming back to Midtown first.’
Source: Business Times, 8 Apr 2010
Post a Comment