Office rents in New York City hit record highs

The average rent being asked by landlords for office leases hit a record high in Manhattan in the first quarter as historically low unemployment fueled the jobs market and leasing activity was above average, brokerage Colliers International said on Monday.

Asking rents rose to US$73.92 a square foot in the first quarter from US$72.24 a square foot in the last quarter of 2016, the brokerage said.

The asking rents for a revitalised downtown set new highs, as did the technology-rich sector of Midtown South. While asking rents also rose during the quarter in Midtown, the largest US office sector by far, they were still 10.4 per cent lower than a record US$92.04 a square foot set in the third quarter of 2008.

Leasing activity declined 4.6 per cent from the first quarter of 2016, but was 27 per cent above the 10-year average.

“The New York market continues to show signs of strength and optimism,” said Joseph Harbert, president of Colliers’ eastern region, adding that 2017 would be a strong year for office leasing, the largest of five commercial real estate segments.

The others are hotels, industrial or warehousing, apartment buildings and retail.

Demand by foreign investors for purchasing office buildings remained strong. Of 14 deals totaling US$2.6 billion during the quarter, 73 per cent were foreign buyers, Colliers said.

The expected return on investment is low as both US and foreign investors place a premium on New York real estate, the firm said.

The non-seasonally adjusted unemployment rate for New York City fell to 4.8 per cent in February from 5.6 per cent a year ago, the New York state Labour Department said last week, citing preliminary data.