The Downtown Manhattan office market continues to deteriorate while Midtown continues to improve. This doesn’t surprise anyone who has been watching the the borough’s commercial real estate industry but the increases in fourth quarter vacancy rates are making observers nervous.
The vacancy rate for Class A office space jumped to nearly 11 percent or an increase of nearly 25 percent year-over-year. Class B also showed a 1.2 percent year-over-year increase in vacancies. Midtown on the other hand showed a 2.1 percent decrease in overall vacancy rates between the last quarter of 2010 and 2009.
Class A office space in Midtown showed one of the best improvements with a drop of 2.4 percent over the last year and there is evidence that rents are starting to increase into the triple digits for marquee properties and newer construction. Midtown South showed even better numbers with class A vacancies under 9 percent and the lowest rates of any section of Manhattan with 9.1 percent.
Some of the increases downtown can be tied to the former headquarters of Goldman Sachs at 85 Broad Street. The company recently left the building and as a result, more than 1 more square feet of space entered the market. Additionally there is still leftover space from financial firms that consolidated or were taken over by other companies and left large blocks of vacant space in their wake.
The office market will recover once the private sector begins adding jobs in meaningful amounts and last week the lowest number of new jobless claims in two years were reported. Manhattan’s financial sector has the most to gain as better market performance will spur hiring and these companies tend to be big users of space throughout all markets of Manhattan.