Manhattan Office Market Shakes Off Summer Blues With Leasing Up 40% Over Last Year
Office leasing picked up again in August across Manhattan, marking the best month since the onset of the pandemic.
Just over 3.4M SF was leased in the borough last month, up 8% over July — the previous pandemic-era high — and an almost 40% jump from August 2021, according to Colliers research.
In all, August was the best month for leasing activity in Manhattan since January 2020. Availability is still high, but is easing slightly, dipping down 0.3% last month to hit 16.7%, its lowest level since April 2021.
Driving the market were blockbuster deals, led by KPMG’s plan to move its headquarters to Brookfield’s Two Manhattan West. The lease is for around 450K SF, which is the largest in New York City this year.
Downtown, which has underperformed Midtown South and Midtown this year, got a boost last month, too. Silverstein Properties inked a deal with law firm Freshfields Bruckhaus Deringer to take 180K SF at 3 World Trade Center for 15 years — the largest Downtown lease of the year so far, according to Savills, and an expansion from the 110K SF it occupies in Midtown at 601 Lexington Ave.
“It’s definitely still a tenants' market, but actually in the Class-A and trophy buildings in that flight to quality that you keep hearing about, their rents are actually rising,” JLL Vice President Lauren Calandriello told Bisnow last week. “The commodity space is where landlords are a little bit more flexible on rents and we're continuing to see concessions be high with free rent.”
The average asking rent decreased by 0.4% from July to hit $75.11 per SF boroughwide, but it is up 3.3% from August 2021, the nadir for office rents in the city, according to Colliers. Average office asking rent in March 2020 was $79.47 per SF.
Midtown South has the highest average rent at $80.90, and downtown the lowest, dropping to an average of $59.21 per SF. Midtown South also saw the highest leasing volume, with 1.5M SF worth of deals inked. Midtown saw 1.3M SF of leasing, and downtown had 500K SF of leases signed — its best month since July 2021, although it still has the highest availability rate in the city at 19.9%, according to Colliers.
More Manhattan office space was leased than vacated for the sixth month in a row, with positive absorption of 1.67M SF.
However, available supply has risen by 67% since March 2020 to 90M SF. Companies are beginning to formulate long-term plans for their office use, which has given a sense of certainty to the leasing market in the city. While many of the splashy deals in the city represent a reduction in space, brokers told Bisnow last week that trend has been happening for some time and won’t destabilize the market.