Cushman & Wakefield report finds Manhattan's office and retail space stabilizing

Cushman & Wakefield's year-end report for Manhattan office space activity in 2009 indicated that the vacancy rate had declined to 11.1 percent in December, "an important sign of stability."

"A substantial increase in leasing activity in the second half of 2009," it said, "helped offset space added to the market, keeping the vacancy rate unchanged from the end of the third quarter."

Leasing activity for the year came to 16.3 million square feet, it said today, a decline of 15 percent from the prior year and the lowest annual total of the decade. The sublease vacancy rate declined to 2.7 percent in December from 2.8 percent in November and a high for the year of 3.0 in July. The decline was the first quarterly drop in the sublease vacancy rate since reached a six-year-low of 0.9 percent in December 2007, the report maintained.

Joseph R. Harbert, the company's chief operating offer for the New York Metro Region, said that the fourth quarter activity in Manhattan "clearly indicates an improving environment relative to the first half of 2009 and suggests the market has begun to stabilize."

The average asking rents in Manhattan at the end of the year fell to $55.52, the lowest point since the first quarter of 2007 when they averaged $53.43 per square foot and they are down 24 percent from their peak of $72.97 in the third quarter of 2008.

At the end of the year, the report found a $21.46 differential between the average asking rent in Midtown and Downtown. The vacancy rate downtown, it continued, declined in the December to 9.6 percent from 10.1 percent in November.

The report indicated that Manhattan property sales declined 82 percent last year to $3.5 billion from $47.7 billion in 2007 and $19.6 billion in 2008. It maintained that "the prevailing obstacle to investment activity in 2009 was the dearth of owners and lenders willing to recognize losses and sell assets."

"There is a big supply and demand imbalance," according to Mr. Harbert, adding that "the high level of frustrated capital should help more owners and lenders opt to sell in 2010 than we saw in 2009."

At the end of the year, the report found that average asking rents for ground floor retail space in Times Square were $658 per square foot, an increase of $71 per square foot from the end of the third quarter. In SoHo, it continued, asking rents increased to $258 per square foot, up $19 per square foot from the end of the third quarter.

Average asking rents on Fifth Avenue between 49th and 60th Streets were $2,000 a square foot, "down $250 per square foot from the end of the third quarter," according to the report, which found that Madison Avenue rents decreased about $10 per square foot in the last quarter to end the year at $834 per square foot.