Manhattan Office Market Closes Sour 2023 On High Note
Manhattan landlords had their best quarter for signing up tenants in more than a year in the final three months of 2023, led by a wave of law firm and financial services activity that buoyed the sector going into the new year.
There were 8.2M SF of office leases signed in Manhattan between October and December, according to Colliers, slightly more than the quarterly average over the past 10 years. It was the most square footage leased since Q3 2022, and it was a 26.7% jump over the previous quarter.
Nearly 10% of the activity could be attributed to law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP signing a 765K SF lease at 1345 Sixth Ave. The other biggest private sector leases closed during Q4 were MetLife's 400K SF extension at 200 Park Ave., PJT Partners' 270K renewal and expansion at 280 Park Ave. and Ralph Lauren's renewal at the Starrett-Lehigh Building. The New York City Administration for Children’s Services' 540K SF extension at 150 William St. was the biggest public sector lease of the quarter.
Midtown was the busiest region in Manhattan, with 4.7M SF leased, the most in two years. Manhattan overall saw 27.3M SF of office leases signed over the full year, down 6.4% from 2022 but 9.1% more than in 2021, according to Colliers.
The boost in activity hasn't set the market back in balance. Average asking rents dipped in the quarter to less than $75 per SF, down 0.8% year-over-year and nearly 6% since March 2020.
Availability is still at an all-time high of 17.9%, although the rate remained unchanged in the quarter, as net absorption was 400K SF, according to Colliers. Absorption, the difference between how much space was taken up and how much was vacated, was still negative 5.1M SF for the full year and is negative 42.6M SF since the onset of the pandemic.
"As 2024 begins, we are still waiting for the paradigm shift to occur where demand outpaces supply on a continual basis," Colliers Executive Managing Director Frank Wallach said in a statement.
What could help landlords fill the vacancy in the market — at 17%, according to Q4 figures from JLL — could be dwindling new supply.
After SL Green delivered its One Madison development and Vornado delivered its Penn 2 project, there is just 7.2M SF of office space under construction in Manhattan as 2024 begins, according to JLL. More than a third of that will come in one owner-occupied building: JPMorgan Chase's 2.5M SF new headquarters at 270 Park Ave., which is expected to deliver in 2025.
