Manhattan Office Leasing Falls Below 2020's Pace
New York's office market saw leasing velocity fall precipitously in April, pacing below the average month in 2022, 2021 and 2020, according to new Colliers data.
A total of 1.5M SF of office leases were signed in April in Manhattan, according to Colliers, marking a nearly 44% decrease from a year ago and a 7.7% drop from March. The activity was slow even for the pandemic era — the average month in 2020 saw nearly 1.6M SF of leases signed, while 2021 and 2022 had averages of 2.1M SF and 2.4M SF, respectively, per Colliers data.
The availability rate jumped again in April and is now at 17.4%, equal to the record high hit in February 2022, according to Colliers, which found that a net of 1.35M SF of office space was vacated.
Some parts of the city have even more empty offices, with downtown Manhattan ending the month with 20.5% availability after only 184K SF in leases were signed in the submarket.
“There are millions of square feet of un-leased, new construction/major renovations and future large vacant blocks in existing buildings scheduled to enter Manhattan’s availability rate in the coming months and years,” Colliers Executive Managing Director Franklin Wallach wrote in an email. “Although there have been some isolated cases of spaces coming off the market due to conversions to non-office use, the ultimate outlook for availability will be dependent on future demand and whether or not it will increase to pre-2020 levels.”
Manhattan's average asking rent was at $75.13 per SF, per Colliers, a 1% increase. That figure is still 5% below March 2020’s average rent of $79.47 per SF, however. Midtown South recorded the highest average rents in April at $81.77 per SF, while downtown rents fell to $58.69 per SF, now nearly 11% below that submarket's pre-pandemic average.
Overall sublet inventory was up by 8.5% over last year, although it ticked down by 690K SF from March's 15-year high, and is now almost 80% higher than it was in March 2020.
Wallach said of the activity in the market, the oft-discussed "'flight to quality' continues to be a key — but not absolute — part of the narrative." Prewar buildings in Midtown ended the month with a 17.3% availability rate, he said, while buildings built after 2000 "had a much healthier 9.6% rate." Lower Manhattan has an even wider split.
Just two leases larger than 100K SF closed during April: HPS Investment Partners’ renewal and expansion at 40 West 57th St. and Sheppard Mullin’s 108K SF expansion at 30 Rockefeller Plaza.
Of the five top deals recorded by Colliers, none were new leases, but Wallach noted that in any given month, a few leases can swing deal volume one way or another and that nearly half of the deals in the first quarter of the year in Manhattan were above 100K SF.
Still, the weak month comes after a particularly rocky time for the city’s leasing market, with the widespread adoption of hybrid working arrangements, economic uncertainty and an ongoing banking crisis discouraging tenants from leasing space at a rapid clip.
"It is clear that we are now in another moment of significant change as businesses rethink their office needs,” SL Green CEO Marc Holliday said on his company's earnings call last month.
The firm is the city’s largest landlord, and in the first quarter of the year its 23.8M SF office portfolio was 90.2% occupied, down from 93% a year prior.
