Strong leasing activity is buoying the New York office market, according to newly released data from Cushman & Wakefield. New leases totaling 4.3 million sq. ft. were signed in May, the highest monthly total on record. This activity has helped lower the Manhattan office vacancy rate to 9.9%, the first dip below 10% since March 2009.

More than 14 million sq. ft. has been leased to date in 2011, up from nearly 10 million sq. ft. in April, and an increase of 35.4% from last year at this time. In the first five months of the year, Cushman & Wakefield tracked 23 transactions with taking rents starting above $100 per sq. ft. The weighted average net effective rent of these transactions was $118.58 per sq. ft.

Overall asking rents in Manhattan registered $55.29 per sq. ft., and have increased an average of 19 cents per sq. ft. every month since the beginning of the year. The average asking rent for Class-A space rose to $63.24 per sq. ft. That’s up from $61.96 per sq. ft. at the end of 2010, a 2.1% increase.

Vacant space in Manhattan is down nearly 2.4 million sq. ft. since the end of 2010 to 38.8 million sq. ft. The lack of sublease space added to the market is a key contributing factor in the declining vacancy rate. Sublease space decreased the past six months and now stands at 5.8 million sq. ft., which accounts for only 14.8% of all available space in Manhattan, down from 22.5% at the end of May 2010.

The downtown Class-A market, in particular, has experienced a noticeable decline in total vacancy, decreasing to 9.8% from 10.2% in April. This is due to a number of new lease deals, most notably CNA Insurance at Two New York Plaza for 74,808 sq. ft. Meanwhile, Regus, the William J. Clinton Foundation and accounting firm BCRS Associates LLC took a total of 83,202 sq. ft. at 77 Water St.

Overall, leasing activity downtown year-to-date is up 190%. This number includes two pre-leasing deals, with Condé Nast taking 1 million sq. ft. at One World Trade Center and the City of New York taking 618,789 at Four World Trade Center. Even excluding these deals, downtown leasing activity through May exceeds the 2010 leasing activity totals by more than 500,000 sq. ft.

“This has been a very strong month, particularly for the downtown market, which has experienced a significant amount of leasing activity,” says Joseph Harbert, Cushman & Wakefield’s chief operating officer for the New York Metro Region. “The recent signing of the Condé Nast lease at One World Trade Center is an indication of the market’s positive momentum.”

The vacancy rates in the other two Manhattan markets surveyed by Cushman & Wakefield — Midtown and Midtown South — remained virtually unchanged from the prior month. The Midtown South market decreased its total vacancy to 7.6% from 7.7% a month ago. Midtown remained unchanged at 10.3%.

In Midtown, more than 2.2 million sq. ft. of leasing activity was recorded for the month of May, which is the highest monthly total since June 2006. This activity was due to new lease deals including Morrison & Foerster LLP for 180,000 sq. ft. at 250 W. 55th St. and Gilt Group for 98,646 sq. ft. at Two Park Ave.

Sublease space in the Midtown Class-A market, which accounts for 46% of inventory across the city, has been trending lower and represents 18.4% of total vacant space, or 3.7 million sq. ft. This decline has helped overall vacancy in the Midtown Class-A market decrease 2.1 percentage points from this time last year to 11.2%.

The overall Midtown South vacancy rate has decreased 2.5 percentage points since it peaked at 10.1% in January 2010. The total asking rents are $44.57 per sq. ft., with a year-over-year increase of 2.1%, or 91 cents per sq. ft. The supply of sublease space is very low, representing just 12% of overall available space.