As of the end of the third quarter of 2016, office leasing velocity was on par with last quarter’s total of 500,000 square feet. For the year to date, leasing activity grew by 17.1 percent and direct rental rates rose about 24 cents per square foot over last year’s rates. Renewals represented slightly more than 50 percent of the leasing in Q3.
New leases totaled 250,000 square feet, which was 22.6 percent less than in Q2, but up 12.5 percent from last year. The increase from last year was primarily due to a large increase in the number of smaller deals signed in Q3 versus the same time last year.
There was a 60.2 percent increase in deals under 5,000 square feet, while deals between 5,001 and 10,000 square feet increased more than 50 percent. The average deal size in Q3 dropped to 4,227 square feet from 7,067 square feet in the same period last year. This is a reversal of trends we have seen in the last couple of years and is really a return to the norm of many years, when deals of less than 5,000 square feet dominated the market.
However, availability countywide at the end of Q3 grew to 25.9 percent against a 23.1 percent availability a year ago, with less occupancy than last year at this time. With a total of 1.1 million square feet of IBM Somers space now officially on the market – compared with 200,000 square feet a year ago – year-to-date absorption is negative 833,000 square feet. This is an example of the tremendous impact of a single large block of space on the market’s vacancy statistics and another souvenir of the downsizing of large corporations.