Midtown Posts More Than 1M SF Of Positive Absorption, Its Highest In Two Years
The Midtown office market continues to show strong leasing activity.
CBRE’s Q3 MarketView report shows Manhattan leasing activity totaled 7.4M SF in Q3, 12% above its five-year quarterly average. Year-to-date, Manhattan has seen nearly 21.1M SF of leasing activity, 24% ahead of last year. The average asking rent was $73.98/SF, virtually unchanged from the previous quarter and from last year.
The availability rate fell to 11.7%, down 30 basis points from Q2, but up 30 bps from last year. Quarterly net absorption registered 1.45M SF.
CBRE Tri-State Director of Research and Analytics Nicole LaRusso said New York’s growing workforce is a driver of the recent strong activity.
“With strong employment growth and an active roster of FIRE [Financial Reporting], TAMI [Technology, Advertising, Media and Information] and government tenant leases, the Manhattan office market continues to perform well,” LaRusso said. “Midtown has a particularly strong showing this quarter, posting more than 1M SF of positive absorption for the first time since Q2 2015.”
Quarterly net absorption in Midtown registered 1.55M SF in Q3, driving the year-to-date total into positive territory for the first time since Q4 2014. The availability rate dropped to 11.6%, the lowest level since May 2016, and decreased from Q2 in eight of the nine Midtown submarkets.
Midtown’s leasing activity totaled 4.84M SF, outperforming its five-year quarterly average by 19%. With 3.09M SF of year-to-date leasing activity, the Penn Station submarket has exceeded its largest year-end total in only three quarters.
Financial services accounted for 33% of leasing activity, followed by technology at 9%.
Large deals continued to prove elusive in Q3 in Midtown South, keeping leasing activity for the quarter at 1.14M SF, 8.8% below its five-year historical average. Transactions below 25K SF remained the driving force for deals completed in Q3, making up 59% of all leasing activity.
The average asking rent saw no change quarter-over-quarter, but is up 4% from a year ago. The availability rate rose a marginal 10 bps to 10.8%, substantially higher than its late 2015 cyclical low. The rise in availability is largely due to new product.
Although the market has seen activity from a wide variety of tenants, TAMI tenants regained their status as the market’s driving force in Q3. TAMI leasing activity more than doubled from the previous quarter, accounting for 56% of all Q3 activity.
Leasing activity in Downtown Manhattan totaled 1.43M SF, an increase of 19% from Q2 and 9% above its five-year quarterly average. Co-working tenants accounted for 16% of quarterly activity, while government tenants accounted for 30%. The trend of tenant relocations into the market continued this quarter, bringing the total migration Downtown to approximately 1.5M SF.
Quarterly net absorption was negligible, and availability remains unchanged quarter-over-quarter. Average concession packages now stand at $83/SF with 12 months of free rent.
This quarter also brought two tenant departures from Downtown. Guardian Life Insurance and Fragomen announced plans to relocate to Midtown’s West Side.
To view the full Q3 CBRE MarketView reports, click below: