The Manhattan office market is doing just fine.
Not every landlord would agree with that, but today’s vacancy rate of 11.5 percent, according to Cushman & Wakefield, is much lower than in the country’s second- and third-largest commercial centers — 16.2 percent in Chicago and 14.5 percent in Washington, DC — and the national average of 15 percent.
Yes, an 11.5 percent local vacancy is incrementally — but misleadingly, as we’ll explain — higher than it was at 10.5 percent one year ago.
But it begs comparison with truly troubled periods in the city’s history.
Cushman’s managing director of New York area research, Ken McCarthy, said, “This has been arguably the worst recession since the 1930s. Here we are in New York, the epicenter of the recession, and the vacancy rate is lower than in 2003, when it peaked at 12.8 percent.”
That was when the city was still reeling from 9/11. But in late 1992, before anyone heard of al Qaeda, “we were at 18.5 percent vacancy,” McCarthy recalled.
While the market’s well off its 2007 peak, it’s more than spry enough to withstand a hiccup.
But you’d never know it from a relentless media drumbeat touting bad news — some merely misleading, some hilariously wrong.
Prominent in the latter category was an article about Ground Zero in last week’s New York magazine, which questioned whether World Trade Center site reconstruction “makes any sense at all, dumping as it does 12 million square feet of office space onto a now-deflated commercial market.”
In fact, all four planned towers, if they’re built, will add less than 10 million square feet. Far from “dumping” anything on the market, neither 1 WTC nor 4 WTC will be completed until 2014 at the earliest. And, as we’ve reported, 2 WTC and 3 WTC might not be built for another 20 years.
The conviction that the commercial scene lies in ruins is impossible to shake in some quarters.
A New York Times op-ed column about LEED-certified buildings last week characterized the grand opening of the Durst Organization’s One Bryant Park as “a ray of hope in a gloomy commercial real estate market.”
A far more balanced piece in yesterday’s Wall Street Journal focused on the importance of large-scale job growth — which has yet to occur — in restoring the market to its pre-crash form. Even so, it omitted vital benchmark data — today’s vacancy rate and comparative rates elsewhere and in the past.
By Cushman’s count, 2010 has been a banner year: Some 4.4 million square feet of new leases were signed in March and April — the most since the record months of June and July of 2007.
Even the one percentage-point vacancy increase from a year ago needs to be qualified.
Today’s 11.5 percent number includes 1 million square feet at the new 11 Times Square, which Cushman only added to the inventory in March (and where law firm Proskauer Rose has since signed for 406,000 square feet).
Rents are obviously down from their peak. The investment-sale market is just getting its wind back. The industry remains edgy over $3 trillion nationally in troubled loans.
But, maybe the most meaningful barometer is how full the office buildings are. They’re quite full, and most indications are that they’ll be even more full down the line.
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Defense-litigation law firm Aaronson Rappaport Feinstein & Deutsch is expanding, moving to 43,424 square feet (the entire fifth and sixth floors) at L&L Holding Co.’s 600 Third Ave. at 40th Street.
Asking rents on the floors were $48 a square foot.
The firm is moving from 757 Third Ave., where it has slightly less space.
Newmark Knight Frank’s Mark Weiss and Robert Eisen berg represented the tenant; L&L Executive Vice President David C. Berkey acted for the owners.
The 550,000 square foot tower is only 6 percent vacant, although an exit at year’s end by Time Warner’s truTV to Atlanta will up it to 20 percent.
But Berkey’s counting on features rare in a 1972 building, such as slab-to-slab heights of nearly 14 feet, to draw new tenants.
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Stephen Hanson‘s BR Guest restaurant company will pay “north of $600,000 a year,” sources said, for what’s currently the O’Neals’ space at 49 W. 64th St.
As the Times Web site reported yesterday, Hanson has taken over the space and plans to turn the longtime burger-and-brew place into a larger, West Side version of his money-machine seafood house, Atlantic Grill, on Third Avenue.
Hanson said the venue has 8,000 square feet. He expects his 250-seater to gross $8 million annually. O’Neals’ lease had not expired, but Hanson structured a new, direct lease with the landlord.
It will be sad when O’Neals’, a local institution since 1964, closes at the end of June. But not long ago, Hanson, in a conversation about his empire, told us, “I wish I had 100 Atlantic Grills.”
Only 98 to go!
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We left a key name out of our story last week about Proskauer’s lease at 11 Times Square.
Andrew Sussman also worked on the CBRE team that represented the law firm and played an integral role. steve.cuozzo@nypost.com