Manhattan Office Market Corrects Itself In August Full Of Leases
Last month, we noted that Manhattan’s office market had a negative absorption rate and questioned if it was a sign of a market slowdown.
Apparently, according to Newmark Grubb Knight Frank and Colliers International’s August Manhattan office market reports, the market was scared straight, as strong leasing outpaced new supply, bringing absorption rates back into the positive and dropping year-over-year availability by 10 basis points to 11.1%.
In the month of August, more than 3.2M SF was leased throughout the Manhattan office market—a 13.3% increase from July and a 10.6% increase year-over-year—with relocations driving much of the activity.
Availability rates remained stable around 9.9% for a third consecutive month, and asking rents are hovering around $76.49/SF, a 7.6% increase from Q2 2015’s $71.08. Most importantly, the absorption rate was a mostly flat, but slightly positive, 0.14 MSF.
The largest deal of the month was Coach’s 738k SF sale-leaseback at 10 Hudson Yards, with Denton’s 207k SF renewal at 1221 Avenue of the Americas a distant second. The month’s other top leases were mainly in the FIRE (finance, insurance and real estate) sectors, with TAMI tenants having a surprisingly quiet August. Only French advertising firm JCDecaux made headlines with its 47k SF lease at the Empire State Building.
Midtown was the biggest leasing driver—up 14.6% month-over-month and 68.6% from August 2015—with seven of the month’s top deals, including Coach, Denton's, Market Axes 83k SF lease at 55 Hudson Yards and ICAP’s 82k SF lease at 4 Times Square.
Alongside the leases came new space at 450 West 33rd St and 777 Third Ave, pushing availability up 20 basis points to 11.6% and absorption at 0.15M SF. Midtown’s asking rents rose 5.7% from August 2015 to $82.59/SF.
Midtown South’s availability dropped from 8.1% to 7.8% as DoubleVerify signed a 32k SF lease at 1 SoHo Square, and Mark 43 signed a 24k SF lease at 63 Madison Ave. Asking rents have taken a sharp rise from this point last year, going from $68.02/SF to $72.18/SF. Leasing is up by more than a third month-over-month, and by 68.6% from August 2015. Absorption was negative at -0.27M SF.
Despite leasing declining 37.9% from last month and by more than 50% year-over-year, Downtown wasn’t a slouch either, with two significant leases at 4 WTC—Zurich Insurance’s 132k SF lease and Global Atlantic Financial Group’s 45k SF lease—bringing down year-over-year availability 50 basis points to 12.4% and raising asking rents 9.6% to $62.42/SF. Absorption was also positive at 0.25M SF.