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Office landlords leased roughly 2.1M SF in Manhattan over the course of November, according to new Colliers data, a sluggish showing for the penultimate month of 2023.
Activity was slower than in October, when multiple large leases were signed, as not a single deal for 200K SF or more closed during November. The month was busier than November 2022, when less than 1.5M SF of deals were signed, but still well behind the 3.2M SF average seen in the five years before the pandemic, according to Colliers.
“Demand still has a ways to go in terms of increasing and fully recovering,” Colliers Executive Managing Director for Research and Business Development Frank Wallach said.
Availability in Manhattan ticked back up to 17.9%, where it was in September, compared to 17% a year ago. Leasing activity for the year is ahead of 2020 and 2021 but still 12.9% below last year's pace.
Between 2010 and 2019, Manhattan’s office leasing market typically saw 33.5M SF in leasing volume, but it is on track to hit somewhere between 25M SF and 26M SF in 2023, Wallach said.
“In 2022, for the full year, we had just about 30M SF of leasing activity rounded,” he said. “In order for 2023 to achieve that, we would need about 6M SF or so of activity just in the month of December, which would be a tall order, to say the least.”
The largest leases signed in the month of November were law firm Dentons’ 160K SF renewal at 1221 Sixth Ave., Palantir’s 140K SF renewal at 620 Sixth Ave., and Ralph Lauren’s 133K SF renewal at 650 Madison Ave. The largest new lease signed during the month was law firm Quinn Emanuel Urquhart & Sullivan's inking for 132K SF at the newly renovated 295 Fifth Ave.
This year’s tenant demand has surpassed 2020 and 2021 levels, but it hasn’t returned to where it was pre-pandemic, Wallach said.
Sluggish demand is contributing to decreasing asking rents. While the decline varied by market, Manhattan’s average asking rents for the month of November hit $75.02, 20 cents below a year ago and 40 cents lower than the previous month.
“We've recorded asking rents in Manhattan decreasing for quite some time,” Wallach said.
Overall, November’s asking rents were down 5.5% from March 2020, but pricing shifts varied by submarkets: Midtown showed a decline of roughly 8%, while Downtown was down more than 12%.
“But Midtown South, those asking rents have increased since March 2020, and they're up by nearly 5%,” Wallach said. “That's being driven by above-average-priced, large blocks of either new construction or Class-A space that's come into the numbers and brought up the average.”
Nonetheless, an overall dearth of office demand means pricing is bifurcating in an extreme way, Wallach said, with Class-A and trophy space in high demand but older buildings forced to lower prices as demand languishes.
“We've seen more deals start above $150 per SF at the top end of the market than really any other time in years,” he said. “We've heard the term ‘flight to quality’ — there is absolutely validity to it, given the number of deals that we've seen close at the top end of the market.”
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