Today, CompStak's Q3 market report was cited in "What's the Deal" in the Wall Street Journal. The full article text is below, or you can read the article at WSJ.com.
Office landlords are cutting rents in order to fill empty space in top-tier buildings, a new report shows.
Rents in so-called "Class A" buildings dropped 7.1% in the third quarter compared with the second quarter, according to CompStak, a database of leasing information. The average rent on top quality Manhattan buildings was $58.42 in the third quarter compared with $62.88 a square foot in the second quarter.
That is still a slight 2.5% increase over the average 2011 Class A rents in Manhattan. CompStak has gathered details on some 12,000 deals.
"I think that it's reflecting a trend that we've been seeing for a little while. Some of the higher-end tenants have been a little bit unsure," says Michael Mandel, chief executive of CompStak. "Landlords had to get aggressive in order to get deals done."
Rents in Class B buildings, which are generally older than Class A buildings, climbed 6.83% in the third quarter to an average of $40.12 per square foot, according to CompStak.
This is arguably a reversal of the typical "flight to quality," in which tenants gobble up higher quality space in a down market. Mr. Mandel says the numbers reflect the split market in the city, in which tech and media companies are leasing space in Midtown South at increasingly high rents, while larger tenants are holding off on signing big deals.