Leasing Remains Stable in Urban Downtowns: C&W Report

NEW YORK CITY-Despite a recent dip in vacancy rates, the overall outlook for leasing activity in downtown US urban markets remains stable, according to Cushman & Wakefield’s senior managing director of research, Maria T. Sicola. In fact, the firm is predicting an industry recovery by the end of this year.

“While the markets remain soft or stable at best, the leasing trends and slowdown in new deliveries and sublease space are positive signs for the future,” says Sicola.

C&W reported that total leasing activity was 17.6 million sf in 1Q 2003 for the 32 downtown markets studied, which is up from 13.1 million feet in the first quarter of ’02. Midtown Manhattan, Orange County, CA and Chicago enjoyed the largest amounts of leasing during the quarter.

Absorption is also improving, although it remains negative. Absorption was –2.6 million sf for the downtowns in the first quarter of the new year, compared to –11.5 million sf in the first quarter of 2002.

Midtown Manhattan, Boston and Washington, DC continue to have the highest rental rates in the nation, with DC leading the way with a 6% increase this quarter. Silicon Valley, Houston, Dallas and Seattle took the biggest hit in the first three months of this year.

In terms of available space, 2003 isn’t off to a great start, reports C&W. Overall in the first quarter, there was about 532 million sf of available office space on the market in US downtowns, compared to the 456.9 million sf that was available this time last year. However, the amount of sublease space has declined by 10 million sf from its peak of 124 million at midyear 2002. Some of that space has been leased and some has returned to the market on a direct basis.

“This indicates that building owners are willing to market space at reduced rents to retain tenants, which should bolster the early renewal market in 2003,” states Sicola.