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Struggling financial and law firms are vacating space faster than other tenants can absorb it, as the availability rate hits 10.9% for the fourth quarter of 2008
The amount of available commercial space for rent in Manhattan rose to its highest level in two years during the fourth quarter as struggling financial and law firms disappeared or contracted and other companies avoided signing leases altogether.
Manhattan’s overall availability rate ended 2008 at 10.9%, more than three percentage points higher than a year ago, according to a report by FirstService Williams. The increased availability and lack of tenants pushed average Manhattan rents to $74.49 a square foot, down nearly 3% from the year-ago period and 4% from the third quarter.
A host of financial service firms, including Citigroup Inc., UBS, Credit Suisse First Boston and the now-gone Bear Stearns, placed a total of almost 1.2 million square feet of sublease space on the market. Meanwhile law firms vacated almost 700,000 square feet of space. The amount of sublease space available hit 2.8%, the highest it has been in three years.
There were fewer tenants to fill all of that space. Leasing activity during the fourth quarter fell 18.4% to 24.7 million square feet from last year.
“With the economy expected to remain sluggish at best during 2009, it is inevitable that the availability rate will rise further, and rents will continue to decline throughout the next several quarters,” said Robert Freedman, FirstService Williams’ executive chairman, in a statement.
Availability increased the most in midtown, home to many of the financial and law firms, where it rose to 11.9%, climbing 4 percentage points from the year-ago period. At $88.81 a square foot, asking rents in that neighborhood were essentially flat with last year’s level but down 4% from the third quarter.
Rents in midtown south took the biggest dive, dropping nearly 10% from last year’s level to $55.00 a square foot. Leasing activity in that area fell a whopping 39% for the year to 13.6 million square feet from 2007.