Manhattan commercial real estate market had experienced positive growth during the first quarter of 2011. Strong leasing activity driven by employment growth and limited supply due to lack of new constructions are key reasons for resilient commercial property market in New York. Office vacancy rate in New York at the end of March 2011 was 10% compared with 11.6% in March 2010.
Improved overall economic outlook, easier access and availability of debt and equity capital resulted in increased investment in properties throughout Manhattan in 2011. During first quarter of 2011, $5.5 billion worth of property transaction took place in New York compared with $2.3 billion during the corresponding period in 2010, an increase of about 133%.
While new leasing activity in Manhattan reached 7.6 million square feet during first three months of 2011, 34% more than figures of 2010. Notably, leasing activity during first quarter of 2011 was highest since third quarter of 2006. Absorption of property is strongest indicator of overall market direction in commercial real estate market. During the quarter ending March 2011, New York experienced about 439,000 square feet of positive absorption despite the fact that more than 600,000 square feet became available for lease during these three months. All three major areas in Manhattan – Midtown, Midtown South and Downtown – had lower vacancies in 2011 indicating broader growth in the market.
Average asking rental rate in New York was $54.73 at the end of March 2011 compared with $54.34 as on December-end 2010.While for class-A commercial real estate, asking rate moved up from $61.96 to 62.47. Net effective rental, which is a reflection of actual completed transactions including landlord concessions, increased by 24% in the first three months of 2011 compared with the same period in 2010. Leasing activity in Manhattan was led by government, education and social services tenants with 19% share followed by apparel (17%) and financial services (16.5%)