Office Landlords Continue to Make Big Gains
Office landlords continue to make headway into perniciously high vacancy rates with a 60 bps drop in Q2. Cushman & Wakefield's Logan Menne tells us the overall office market vacancy rate hit 17.2%, the lowest level since 2008 as landlords saw nearly 740k SF taken up by companies this past quarter. That's the 14th consecutive quarter of net occupancy gains in the metro area as well, and was spearheaded in large part by Kaiser Permanente's 157k deal at Pershing Point Plaza (here) in Midtown and Sage Software's 78,800 SF lease at 271 17th St for its US HQ.
But Logan notes that overall leasing activity in Q2 (1.9M SF) is actually down 9% from the same time last year, and the actual absorption is down more than 11% for the same period in 2014. Is this a sign that the sky is falling? Nope. It's just that the first half of 2014 was exceptionally strong. "It's not that leasing activity has fallen off necessarily. It's just that you're comparing it to something that was stronger than normal," Logan says. But demand has been dampened by a lack of available prime space for companies. "That's why I think we're starting to see more talk of construction that's actually going to happen. They're forced to almost look at new construction or build-to-suit options as well." Logan says the firm is tracking in excess of 5M SF of deals still in the market.