Commercial Rental Rates Plummet in Manhattan

The New York Sun reports:

The slowdown in the real estate market is finally hitting New York office space: After years of surging upward, commercial rental rates in Manhattan decreased in the second quarter, a new report shows.

Asking rent declined 2.2%, to $69.29 a square foot, while Class A rents plummeted 4.4%, to $90.65, according to Studley's second-quarter market report, released yesterday. Meanwhile, the availability rate jumped half of a percentage point, to 8.2% — nearly a full percentage point higher than a year ago. At the same time, the supply of sublet space is increasing, up 34% versus the prior quarter, to 8.3 million square feet.

This is the first time since 2005 that rents have declined and the availability rate has been so high. "What's happening this quarter is pretty significant," a senior vice president at Studley, Steven Coutts, said. "We've really seen rental rate growth begin and continue on a steady course since the third quarter of 2003. This is the first we've seen that rents have come down since then." In the third quarter of 2005 there was a minor dip in rents, but it was temporary, he said.