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The city's troubled office market got a boost last month with a sharp uptick in leasing from September, although increasing supply continues to cause challenges.
Roughly 2.7M SF of office space was leased during the month of October, a nearly 11% increase from September and a 52% jump from October 2020, according to Colliers' monthly leasing snapshot. That leasing total translates to the best month of activity since January 2020. Sublet availability went down, but the city's overall availability rate has gone up to 17%, according to Colliers.
That availability jump is largely thanks to the addition of 1.4M SF of available space from 2 Manhattan West, which is under construction.
“The increased leasing volume is one of the signs pointing towards Manhattan’s gradual recovery,” Colliers Senior Managing Director Franklin Wallach said in an email.
He noted that with two months left to go, 2021 has already surpassed the total amount leased in all of 2020. Leasing totals still lag behind pre-pandemic figures, however — this year's year-to-date leasing total is 19M SF, barely more than half the nearly 34M SF at this point in 2019. During October, the average price per SF hit $73.66, a 1% increase. That is the biggest month-over-month increase in two years, but rents are still down 7% on average from March 2020.
“There’s still a major hill to climb in terms of demand returning to anything resembling the pre-pandemic figures and, most importantly, demand alone doesn’t dictate the state of the market," Wallach said. "It’s the relationship between demand and the supply.”
There are dozens of blocks of office space 250K SF or larger that are seeking tenants. While office brokers have said there are many tenants in the market seeking large office space, Wallach said the increasing supply will continue to be a challenge to Manhattan’s recovery in the short term.
“There is 24.8M SF of office construction/major renovations scheduled for completion in 2022-2024 in the Manhattan office market — the most in a 3-year period since the 1980's,” he wrote.
In Midtown, leasing picked up by more than 50% from September, while leasing in Midtown South fell by a third month-over-month. Downtown leasing went up by nearly 50%, though it is still half the monthly leasing average from before the pandemic. Availability in that part of the city is now at 18%, Colliers data shows, which is a record.
The biggest leases of the month were NBCUniversal signing another extension for 339K SF at 1221 Sixth Ave., Venable’s 157K SF lease at 151 West 42nd St., Verizon's deal for nearly 143K SF at 155 Delancy St. and Orchard's 107K SF lease at 195 Broadway.
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