Manhattan office leasing activity in July shows resilience

By Herbert Lash

NEW YORK (Reuters) – A jump in Manhattan office leasing activity in July indicates more resilience in New York’s commercial real estate market than recent data has suggested, with asking prices poised to surpass their record high in 2008.

Data showing more companies are renewing their leases rather than moving to a new location have been seen as a sign of market weakness because a move is more costly than signing a new lease.

Of 26 leases for 100,000 square feet or more through June of this year, 16 were for renewals compared with just 10 renewals for the 25 deals struck in the same six-month period last year, data from Colliers International Group Inc show.

“Everybody is waiting for the shoe to drop, whether that’s the New York real estate market or the overall economy,” said Craig Caggiano, executive director for the New York tri-state region at Colliers.

While renewals versus relocations are a market indicator, there can be a number of reasons why a tenant renews a lease instead of moving, Caggiano said. “We caution against taking any one statistic, any one piece of market information,” he said.

Asking rents are on the brink of surpassing record quarterly figures from 2008, but concessions such as the amount of free rent given to new tenants has risen substantially, which some say is sign of weakness.

The average asking price per square foot of office space in July was $73.72, higher than the record $73.31 a square foot set in the third quarter of 2008. Asking rents rose 1.1 percent last month from June and 6.2 percent from July 2015, Colliers said.

Leasing activity last month jumped 22.8 percent from June to 2.93 million square feet, and was up 22.6 percent from a year earlier, Colliers said.

A closely watched benchmark for New York’s high-end office market are deals priced above $150 per square foot this year.

There have been nine deals this year that have closed with asking rents of $150 per square foot, surpassing the seven deals for all of 2015 and on track to surpass the 16 deals in 2014.

“It’s been relatively strong year-to-date numbers and July has not given us any pause to say there was much of a deviation from what we’ve seen thus far,” he said.

(Reporting by Herbert Lash; Editing by Richard Chang and Alan Crosby)