Manhattan Office Market Tightens, Bolstered By Big Leases
As more companies call workers into the office with increasing frequency, Manhattan’s leasing market has caught a small tailwind.
Leasing volume was up in Manhattan in May, with 3M SF of office leases signed during the month, according to Colliers. That is almost 200K SF more than April’s total and a 70% increase year-over-year.
May’s leasing activity was above the five-year rolling average of 2.3M SF, according to Colliers, but is still off the 3.6M SF monthly average in 2019.
Landlords will take it, however, as it builds upon the momentum established in April, when the city's availability rate finally ticked down from record highs. The rate of office space in Manhattan seeking a tenant dropped again in May, from 18% to 17.9%.
The biggest deal of the month was Bloomberg’s nearly 1M SF renewal at real estate investment trust Alexander’s Inc.’s 731 Lexington Ave. The financial information and media company has been in the building since it opened two decades ago and will stay put until 2040 in the same footprint.
"As the Bloomberg lease demonstrated, one or two mega deals can greatly impact leasing volume during a given period," Franklin Wallach, executive managing director of research and business development for Colliers in New York, said in a statement.
The five largest leases signed during May accounted for almost 1.5M SF combined, around half the month’s total volume.
The next largest deal was Bain & Co.’s 235K SF lease at Milstein Properties’ 22 Vanderbilt Ave., the largest new lease signed during the month. That was followed by the 126K SF lease signed by The Trade Desk at Brookfield Properties’ 1114 Sixth Ave., an expansion for the advertising tech firm.
The fourth and fifth biggest leases signed during the month were Duane Morris’ 79K SF lease, also at 22 Vanderbilt, and Herrick Feinstein’s 77K SF renewal and move within 2 Park Ave.
The dip in availability rate was driven by Lower Manhattan, where availability fell by 1.1% to 20.4% after more than 1M SF at 111 Wall St. was removed from the market as its owner pursues a residential conversion for the vacant office building.
Downtown’s largest lease during the month was Kroll’s 48K SF sublease at 1 World Trade Center, which Bisnow first reported.
Availability in Midtown increased by 0.1% to 16.2% and rose in Midtown South by 0.3% to 18.7%. Large blocks at 1121 Sixth Ave., 125 W. 57th St., 770 Broadway and 11 Madison Ave. came available in those submarkets, Colliers reported.
Sublease availability in Manhattan also ticked down by 110K SF during the month and was 4.2% lower than a year ago, according to Colliers.
"The rate of excess supply coming to market has moderated and even contracted in certain corridors," Wallach said. "Whether this trend continues will be greatly dependent on tenant demand during the remainder of the year."
Asking rents ticked up overall, increasing 0.6% from April to an average of $74.59 per SF, but they are down from last year. Downtown's continued leasing weakness has dragged asking rates to $57.04, the lowest level since 2015. Rents in the city are down more than 6% from where they were pre-pandemic, according to Colliers.
