The Q2 vacancy rate measured 12.26 percent, marginally down from 12.27 percent in the first quarter and down from 13.09 percent in the second quarter of 2006. "As predicted, demand for office space picked up relative to the first quarter, but is still operating below anticipated levels," observed Ross Moore, senior vice president and director of market & economic research at Colliers International. "Of particular concern is the slowdown in office using employment. However, that aside, the story is generally the same - steady demand, significant increases in rents and a gradual increase in supply."
Rents posted further spikes during Q2, with downtown lease rates rising particularly sharply. Downtown asking rents jumped 8.3 percent during Q2 to reach an average of $46.81 per square foot (psf), unsurprisingly led by Midtown Manhattan. Suburban rents increased 4.5 percent to $27.45 psf. This left downtown rents up 24.7 percent over the year, while suburban rents increased by 10.0 percent. Fewer markets (7 compared with 10 at the end of Q1) anticipate less demand for space in the coming three months - while the clear majority have forecasted steady if not rising demand in their market.
As for new construction, completions totaled 17.5 msf during the second quarter, compared with 14.1 msf in Q1; and year-ago completions totaled 14.6 msf. Another 114.9 msf is currently under construction, most of which is anticipated to be completed in the next 18 months. 119.2 msf was under construction at the end of the first quarter, as compared with 85.2 msf in the year-ago quarter.
