By Carter B. Horsley

The city’s office space market continues to very tight although leasing activity was down 40 percent in July in Midtown and 24 percent since the start of the year, according to reports by Insignia/ESG.

"Even though the overall rate of Midtown leasing activity was a far cry from the torrid pace of a year ago, tenants still took more space off the market than they returned in the first half" of 1999, the report said. "Growth within the legal and financial services industries, along with the absence of new speculative construction, fueled significant tightening," it continued.

Midtown’s vacancy rate fell one and half percentage points to 7.2 percent, the study found, adding that "tighter market conditions have not existed since 1985." Average asking rents in Midtown in June were $44.77 a square foot a year, a 2.5 percent increase since January. The company’s report for August indicated that rents had climbed to $45.29 in Midtown, up 10 percent from the year before.

The Downtown office market also had a decline in activity from the year before. In the first half of this year, its vacancy rate fell less than one percentage point to 11.6 percent while its average asking rent rose two percent to $32.43,
up 12 percent over the past year," the Insignia/ESG report maintained. The company’s report for August indicated that rents in August remained at $32.43.

The Midtown South market, which in this report also includes TriBeCa, Hudson Square and SoHo, had a vacancy rate of only 5.6 percent and an average asking rent of $32.29 a square foot. "Because Midtown South has seen few new availabilities, landlords have raised average rents by 32 percent over the past year," the study found. The company’s report for August indicated that rents climbed further to $32.87 a square foot.