Manhattan Office Leasing Down 50% In Typically Busy November
Office leasing in Manhattan weathered a slower month in November, with leasing activity falling to its lowest level since April 2021.
Tenants signed less than 1.5M SF worth of office leases last month, a 7% drop from October and a 50% drop from November 2021, according to Colliers figures released Thursday. Direct availability and sublease space both ticked upward as well.
This time of year typically sees an increase in activity, as real estate players rush to close deals before the end of the year, but this year is playing out differently, Colliers Executive Managing Director Franklin Wallach wrote in an email.
“The level of demand so far in Q4 was below-average,” Wallach said. “The available supply increased with blocks of sublet space, new construction/major renovation and soon-to-be vacant blocks of space continuing to enter the market, leading to record-high availability in Midtown South and Downtown.”
The largest deals of the month were on the smaller end, with coworking provider Jay Suites’ 60K SF location at Arline Hannon-Weinmann’s 159 West 25th St. and PJT Partners’ expansion to 49K SF at 280 Park Ave.
The activity in the market has instead been dominated by pullbacks from large companies. Meta is reportedly returning over 250K SF at 30 and 35 Hudson Yards to Related Cos., Bloomberg reported. Facebook's parent company, which laid off 11,000 workers last month, is declining the option to renew its lease on the two properties when its deal there ends in 2024, according to the publication.
Average asking rents in Manhattan were at $75.19 per SF, a slight increase from November last year, per Colliers, but still below March 2020’s figure. Availability across the borough is largely unchanged from last year at 17%. Sublet space has been steadily increasing, growing 11.7% from the end of last year and increasing again in November to hit a total of nearly 21M SF.
While absorption was at negative 1.36M SF, Wallach said that demand for offices overall has gone up, with year-to-date leasing volume in 2022 nearly 25% higher than at this point in 2021.
“Demand did not keep pace with supply over the last two months," he wrote. "The demand must increase in order to off-set the supply that will continue to enter the market. More new construction/major renovations are scheduled for delivery in the coming quarters along with millions of square feet of upcoming vacancies due to committed tenant relocations.”
The months of October and November saw the lowest levels of activity in Midtown’s office leasing market this year, but availability did tighten in the submarket to hit 15%.
In Midtown South, leasing fell 25% between October and November, and more than 894K SF was added to the market with the renovation of Penn 2. Average rents in the neighborhood hit $82.53 per SF.
Downtown’s leasing went up from the month before, but was down 44% from a year earlier. Lower Manhattan’s availability has more than doubled since March 2020 to now sit at 22M SF, a record high 20.6% of inventory.