Manhattan Clocks Most Active Quarter For Office Leases Since 2019
Manhattan’s office market’s hot streak has continued, with 12.2M SF of leases signed in the first quarter.
That’s the strongest period since the fourth quarter of 2019 — the last full quarter before the pandemic — according to a Savills report. Heightened leasing pushed office availability down to 17.7% from 20.1% a year ago.
Large tenants expanding and upgrading their real estate portfolios have especially been beneficial to the market’s recovery. There were 16 deals of at least 100K SF in the quarter, totaling 4M SF. Eight of the 10 largest leases were renewals, five of which were also expansions, according to the report.
At 250 Vesey St. in Brookfield Place, Jane Street Capital renewed and expanded to nearly 1M SF, essentially doubling its footprint. Landlord Brookfield Asset Management relocated its own offices in the complex to make room for the trading firm, Bloomberg reported.
Although tenants in the finance, insurance and real estate industries have previously led the return-to-office movement, activity has picked up in the technology, advertising, media and information sector. Those businesses made up more than 20% of the quarter’s leasing volume, according to Savills.
The leader of that pack was Universal Music Group, which signed the largest relocation deal for the quarter, a 334K SF lease at 2 Penn Plaza. The deal also represents an expansion from its 242K SF at 1755 Broadway, Commercial Observer reported.
Horizon Media's renewal of its 360K SF lease at One Hudson Square was the largest TAMI deal overall. Amazon, which has been on a leasing spree, also took over 193K SF in a sublease at 237 Park Ave. during the quarter.
Trophy and Class-A office space are only getting more popular. Manhattan’s trophy availability is now below 12%, according to the report. In Midtown, it is as low as 7.5%, down from 14.6% a year ago. The availability rate for Class-B and C office space, on the other hand, dipped just 40 basis year-over-year to 19.4%.
Overall, the average asking rental rate for all Manhattan offices is just under $75 per SF. The overall asking rate is 2.1% lower than it was a year ago, driven largely by lower-quality office space. Class-A landlords are asking for more than $85 per SF on average, a half-percentage-point increase year-over-year.
Hudson Yards is especially desirable, with an availability rate of just 9% and the rental rate for all buildings in the neighborhood averaging roughly $163 per SF.
The Plaza District, which has become a hotbed for new development, has an availability rate below 12%. Plaza North follows Hudson Yards with the second-highest rental rate in the city, at $125 per SF. In Plaza South, rents sit at about $101 per SF.
Across the city, available sublease space has also fallen from 21.3M SF in Q1 2024 to 16M SF during the same period this year. Some of that sublease availability decline can be attributed to leases expiring without being backfilled.
The least sought-after neighborhoods remain in Lower Manhattan. The Financial District, where most of the city’s early office-to-residential conversions are taking place, has an availability rate of 25.6%, with rents at an average of about $56 per SF.
Tribeca has Manhattan's highest availability rate, at 27%, though asking rents are higher, north of $70 per SF.
