Manhattan Office Availability Hits Highest Point In 16 Years
Manhattan’s office availability rate hit its highest point since 2004 last month as uncertainty grows about what the future of the workspace — and the nation's largest office market — will look like.
While leasing activity increased 57.4% over September, with 1.76M SF of new space signed, office availability continued to grow to a 16-year high at 12.9%, a near three-percentage point increase year-over-year, with sublet space increasing by 1.25M SF, according to a Colliers report released Monday.
Asking rents dropped 4.3% year-over-year as the absorption rate hit negative 3.3M SF, according to Colliers.
“October is the continuation of a trend that’s been going on …. since all of this began,” Colliers Senior Managing Director of Research Frank Wallach said. “Demand needs to increase in order to counter the amount of space returning to the market, and there are deals that are taking place …. but new deal activity is a smaller part of the conversation compared to pre-pandemic.”
Leasing activity was concentrated in Midtown South — the preferred submarket of tech companies — which made up almost 70% of total leasing activity for the month, with 1.2M SF signed in new leases and renewals.
The four largest leases signed this month were all in Midtown South, including marketing company Centric Brand’s 212K SF renewal at the Empire State Building and the largest new lease of the month, Noom's 113K SF lease at Brookfield’s Five Manhattan West.
New York University Langone’s 633K SF renewal at Vornado’s One Park Avenue — the second-largest office lease signed this year to date, trailing only Facebook’s at the Farley Building — was the largest deal of the month, also in Midtown South.
But even in the tech-heavy area, leasing volume was down 16.1% year-over-year. That compared favorably to Midtown, where less than 400K SF of leases were signed, down 63.7% from September and more than 81% from October 2019, when 1.74M SF of leases were signed in Midtown.
In Midtown and Lower Manhattan, the deals that were signed were primarily renewals as the total volume of sublet space to become available — including 155K SF at 333 West 34th St. and 116K SF at 114 Fifth Ave. — rose significantly.
“Midtown South’s availability rate is the highest on record and that’s because those deals were primarily renewals,” Wallach said. “But without new deal activity or expansion to help counter the new space coming onto the market, then renewal activity alone will not stem the tide … new deal activity and expansions, that’s the key.”
The Manhattan office market has been met with strife since the coronavirus pandemic took hold in New York. Rents saw their starkest decline since 2009 in Q3 with sublet space set to surpass the peak of the Great Financial Crisis and leasing volume on course to hit its lowest yearly total this century.
It is unclear when the recovery might begin, but despite activity rising, supply is far outstripping demand. Colliers' report noted multiple spaces already on the market revised their asking price downward last month.
CORRECTION, NOV. 2, 4:35 P.M. ET: A previous version of this story incorrectly stated that there was less than 40K SF of leasing activity in Midtown in October. There was less than 400K SF. This story has been updated.