While he describes Manhattan's office market as “healthy” at the moment, he cautions, “I think we are facing some headwinds in terms of supply. So we really need demand to pick up for the rest of the year. And there are some big deals that are in the pipeline that we are tracking that we think will boost that.”

Manhattan's average asking rent stood at $73.05-per-square-foot, up slightly ($0.31-per-square-foot) over the fourth quarter 2017 rate. The asking rent averages for eight of Manhattan's 18 submarkets were higher, quarter-over-quarter.

The borough's office availability rate rose slightly to 10.3% at the end of the first quarter of 2018. Colliers reports that office space absorption was at a negative 2.42 million square feet—Manhattan's highest quarterly negative absorption in nine years.

“Job growth in Manhattan remains strong, besting comparable national and New York State employment numbers,” notes David Amsterdam, president—investments, leasing and eastern region for Colliers International. “FIRE tenants were active in the first quarter with continued interest downtown from the TAMI sector. Pricing was relatively stable in the first quarter overall with certain markets posting record asking rents but others presenting value opportunities for tenants with the flexibility to leverage cost over location.”

Job creation remains strong, according to the latest New York State Department of Labor statistics. From February 2017 to February 2018, New York City added 74,700 new private sector jobs, a 2% increase. New York City bettered annual employment growth nationally (at 1.8%) and for New York State (at 1.2%). Unemployment in New York City (as of February 2018) was down 0.6 percentage points since the same point last year to 4.4%. The unemployment rate did increase slightly since the fourth quarter of 2017 by 0.4 percentage points.

Google's $2.4-billion purchase of the Chelsea Market helped fuel the first quarter's $8.37 billion in overall investment sales in Manhattan, including $5.2 billion in total office sales during the first three months of this year. First quarter office sales were significantly higher than the $2.58 billion recorded in the first quarter of 2017, but below the $6.7 billion registered in the first three months of 2016.

The average price-per-square-foot for a Manhattan office building was $1,198. When excluding the Chelsea Market sale, the average sale price was $890-per-square-foot, which was still at a near record level, Colliers states. There is an additional $5 billion in deals under contract ($1.6 billion of office), so the firm expects an active first half of 2018 in the investment sales arena.

“Demand for office assets has not waned, even as the 10-year treasury gradually increases,” says Scott Latham, vice chairman, Colliers Capital Markets. “Cap rates are beginning to reflect the impact of higher interest rates with an upward movement of 25 to 50 basis points, year-over-year.”

He continues, “Several macro-economic uncertainties remain in the market, most notable being the potential impact of tariffs, volatility in the equities market and the pace at which the Fed continues to raise rates.”

With stagnant rent growth, and increasing interior construction costs, cap rates are expected to remain higher than the previous 24 months, Colliers predicts.