Manhattan office leasing kicked into high gear in the third quarter as financial services jobs surpassed prerecession levels in August, but new construction kept rental increases low, according to new statistics released by real estate services firm JLL.
Leasing activity, which includes new deals and renewal transactions, reached 9.85 million square feet in the third quarter, a 35% increase from the 7.3 million square feet of leasing in the same period of 2016, JLL said.
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Eight of the largest office leasing deals were located in Midtown Manhattan, and seven of the eight were for space west of Fifth Avenue, continuing the westward movement that has been taking place since the beginning of the year, JLL said.
During the quarter, big firms such as money manager BlackRock Inc., tech giant Amazon.com Inc. and global professional services firm Accenture signed deals each for hundreds of thousands of square feet in new developments rising on the far West Side, JLL noted.
"Those collective deals are game-changers," said Cynthia Wasserberger, executive managing director.
Those large deals have helped raise interest in the far West Side and played a part in pushing rents up into the $100 range, Ms. Wasserberger said.
But while this past quarter's vacancy rate in Midtown Manhattan, which includes the far West Side, dropped to 10.4% from 11.7% in the previous year, average asking rents in that submarket dropped by 0.7% to $75.19 a square foot.
Overall vacancy in Manhattan rose 0.2 percentage point to 10.2%, while average asking rents for the island rose 0.7% to $71.12 a square foot, JLL said. The virtually flat rents are a result of landlords trying to maintain rent levels in the face of new office construction adding space in Midtown and Downtown.
"Asking rents are pretty stable, and landlords are trying to hold to those numbers, but concession dollars -- free rent, [tenant space improvement] allowances -- have really increased substantially," Ms. Wasserberger said.
The financial-services sector, a critical part of Manhattan's office market, also recouped the jobs lost during the recession, reaching 477,800 in August, JLL said. Although the job count for the sector remains below its record high of 525,000 in 1990, the August numbers surpassed the 472,900 positions recorded in December 2007.
The finance, insurance and real-estate industries together remained dominant players in Manhattan office leasing, accounting for a third of all office leasing so far this year, JLL said.
Write to Keiko Morris at Keiko.Morris@wsj.com
(END) Dow Jones Newswires
October 08, 2017 20:29 ET (00:29 GMT)