This Summer’s Office Market: Swan Song or More of the Same?

The Manhattan office market left the summer behind as healthy as ever, with vacancy rates low and rents rising to record-high averages. Still, one has to wonder: With the credit market crises continuing, was the third quarter of 2007 a swan song?

The overall office rent for Manhattan was $62.91 a square foot in the third quarter, which ended Sunday, according to a new report from brokerage Cushman & Wakefield. That's an increase of more than $3 over the second-quarter average and a nearly $10 increase over the first quarter's average. In midtown, where the the choicest office space abounds, rents hit a record high of $74.47 a foot; they averaged nearly $50 a foot a year ago.

But the borough's vacancy rates perhaps foreshadow rockier times to come. The vacancy rate rose in midtown and midtown south from the second quarter to the third, and in Manhattan overall. Still, the increases were mild; in midtown, for instance, it rose from 5.3 percent to 5.6 percent. And all the vacancy rates were lower than they were a year ago.

The Observer's John Koblin will have more on the office market numbers in tomorrow's paper.