NEW YORK — Hundreds of displaced tenants leased nearly 1 million sq. ft. in September as a result of the terrorist attack on World Trade Center. In October, they leased 2.6 million sq. ft., the highest monthly leasing total since March 2000, according to a report by Insignia/ESG.

"The gradual rise in availability that occurred during much of this year made it possible for the majority of displaced downtown tenants to find new accommodations in New York," said Joseph R. Harbert, COO of Insignia/ESG’s New York Metro Region. "More than two-thirds of all space leased by those affected companies is located in midtown."

But even with high levels of leasing activity, the market continued to soften as companies unload sublease space. According to the report, net absorption downtown totaled negative 3.35 million sq. ft. for the month as safety concerns exacerbated economic woes. Add that to the 12.9 million sq. ft. lost in the terrorist attacks, and downtown’s absorption rate dropped to negative 18.19 million sq. ft., the report stated.

October market activity

According to Insignia/ESG, average asking rents in downtown rose $1.48 per sq. ft. to $42.02 per sq. ft., while dipping marginally in midtown to $59.49 per sq. ft. and in midtown south to $41.23 per sq. ft. Despite strong activity, available supply increased across the board. Downtown’s availability jumped nearly four points to 11.3%, midtown’s rate was up 0.7 points to 8.6%, and midtown south’s availability increased 0.8 points to 11.6%.

In October, a handful of large blocks of space became available in each market. There are four contiguous blocks larger than 250,000 sq. ft. available in midtown and downtown and just two in midtown south.

Downtown buildings open

Several buildings near Ground Zero also recently reopened, including 1 Liberty Plaza, 1 and 2 World Financial Center. NASDAQ and Cleary Gottlieb Steen & Hamilton have indicated plans to return to their repaired offices. Downtown’s leasing totaled 402,000 sq. ft. in October, but remains somewhat constrained as tenants await news of the pending governmental financial aid package.

Midtown’s total leasing reached 10.88 million sq. ft. for the year to date. More than half of the Manhattan office space leased by displaced downtown tenants has been in midtown. Lehman Brothers, displaced from the 3 World Financial Center and 4 World Trade Center, signed a long-term lease for 408,000 sq. ft. at 399 Park Ave. Lehman Brothers also reached agreement to purchase the 1 million sq. ft. office building at 745 Seventh Ave. from Morgan Stanley; the acquisition is expected to close this month.

Roughly one-fourth of the space leased in Manhattan by displaced downtown tenants was located in Midtown South. The Port Authority of New York & New Jersey, owner of the World Trade Center site, leased 302,000 sq. ft. at 115-223 Park Ave. Bank of New York leased 137,000 sq. ft. at 1 Hudson Square and 113,000 sq. ft. at 63 Madison Ave. Year-to-date leasing tallied 4.96 million sq. ft., down only slightly from last year’s 5.32 million sq. ft. for the same period.