Rents for Manhattan’s prime offices surged 38 per cent in the second quarter to a record as financial services companies sought more space

Rents for Manhattan’s prime offices surged 38 per cent in the second quarter to a record as financial services companies sought more space, according to commercial broker Cushman & Wakefield.

Average asking rents rose to US$69.58 per sq ft (psf) for Class A properties, those with the best technology and the best locations. Average rents on all classes of office space climbed 36 per cent to US$59.17 psf, New York-based Cushman & Wakefield said.

‘One out of every three sq ft of office space in Manhattan is currently being sought by financial tenants,’ Joseph Harbert, C& W’s regional chief operating officer, said. Employment, mergers and acquisitions drove demand, he said. A record US$2.7 trillion in corporate takeovers have been announced this year, with New York-based investment banks such as Goldman Sachs Group Inc and law firms including Sullivan & Cromwell LLP ranking as top advisers. New York City added 52,000 jobs in the 12 months ending in May, a 1.7 per cent increase, according to the state Labour Department.

In midtown, the nation’s most expensive office market, average rents for the most sought-after properties leapt 35 per cent to US$75.79 psf. On Park Avenue, home to skyscrapers such as the Seagram Building designed by Ludwig Mies van der Rohe, rents surpassed an average of US$100 psf for the first time. Retail space on Madison Avenue rented for 10 times that amount, passing US$1,000 psf for shops on the street where fashion boutiques Hermes and Dolce & Gabbana are located.

Office vacancy rates dropped in both midtown and downtown. The percentage of available space in midtown fell to 5.3 per cent from 6.9 per cent a year ago. Downtown vacancy fell to 6.7per cent from 11.2 per cent. Class A rents downtown jumped nearly 26 per cent to US$50 psf.

‘Tenants are being priced out of midtown,’ MrHarbert said. ‘We’re also seeing tenants from a diverse range of industries that genuinely want to operate downtown.’

Source: The Business Times, 12 July 2007