Springing back

Office leasing is picking up momentum as all three Manhattan markets had positive absorption with rents starting to rise and vacancy down to 10 percent. Brokerages agree that midtown south is the tightest market in the nation while the Plaza district is the priciest.

First quarter leasing totaled 7.6 million feet overall — the best quarter since the third quarter of 2006.

“Companies are feeling good about business, whereas two years ago it was gloom and doom,” observed David Falk, president of the tri-state region for Newmark Knight Frank.

The market is also starting to see hedge funds paying $100 per square-foot to $120 a square-foot rents again. “The tower floors in the Plaza district are leading the recovery,” said Robert Freedman, Chairman of Colliers International.

Robert Emden, executive managing director, Newmark Knight Frank, who concentrates in the Plaza district, agreed there is a lot of activity with rising prices and expanding tenants. “Demand is up but whether or not they get signed is another thing,” he warned. “I’m working a couple of transactions in the Bryant Park area and those rents are up, too.”

Both Boston Properties’ new 510 Madison — where a 66,000-square-foot deal with Steve Cohen’s SAC Capital at what could be about $80 per foot has been brewing since last fall — and LCOR’s new 545 Madison will benefit from this market. “There is no question this is a rising market,” said Emden.

LCOR signed five leases at the end of 2010 at 545 Madison Ave. in the high $70s per square foot. Since then, David Sigman, executive vice president LCOR, said leasing has slowed for these under 9,000 square-foot boutique tenants.

“A lot of landlords moved rents up and you are seeing a reaction to higher rents,” said Sigman. ”These are smaller tenants and they don’t have a strategic space requirement. Then they read the paper and see the Middle East or Japan, so they are going to stay short term in the buildings they are in and the buildings are willing to accommodate them.”

Asking rents in that LEED gold building are now in the low $70s to $80s a square-foot, he said.

Freedman also sees a flight to quality. “We had pent-up demand and when the market was skimming along the bottom, the tenants deferred the decision, but they are now trading up,” Freedman said.

Unfortunately, Freedman noted, a lot of firms are moving into spaces that are a bit smaller, because there is more emphasis on cubicles with open floors and even perimeter offices with their glass walls are now smaller than they were 10 years ago.