A needed wave of leasing activity — the strongest quarterly surge in more than two years — aided Manhattan’s office vacancy rate during the first quarter of 2004. Overall vacancy rates in Manhattan fell to 12.2% at the end of the first quarter from 12.5% at the end of 2003, according to global real estate brokerage Cushman & Wakefield.

"There has been moderate economic growth from a variety of sectors," says Ken Krasnow, executive managing director of Cushman’s New York offices. "Add that to an equation in New York City where tremendous opportunity exists in the sublease market, and it becomes clear that decision makers are using a positive economic outlook to take advantage of sublease opportunities while they can."

Meanwhile, new leasing activity for the quarter totaled 7.7 million sq. ft. vs. 5.8 million sq. ft. during the first quarter of 2003.

Another encouraging sign: Declines in the vacancy rate continued to thin out the sublease market. The vacancy rate for sublease space fell from 4.1% in the first quarter of 2003 to 3.1% in the first quarter of 2004. Sublease space accounts for one-quarter of all available space — an improvement over April 2003 when 32.8% of available space was sublease space.

Average asking rates also continued to decline in Manhattan, to $40.06 in the first quarter from $40.53 at the end of 2003. This was largely due to a strong decline in lower Manhattan rents, which dropped to an average of $33.68 from $36.92 during the first quarter. Conversely, rents in Midtown and Midtown South increased.