NEW YORK CITY—Manhattan finished out the second quarter with 2.15 million square feet of leasing activity, a 65% decrease from first-quarter 2020 and 69% below the five-year quarterly average, according to CBRE's quarterly report on the market. Yet, despite the steep decline in leasing, the average asking rent was $81.30 per square feet, essentially flat quarter-over-quarter but up 1% from the same period last year.
"Occupiers unsurprisingly adopted a wait-and-see approach to their real estate needs in Q2, with the COVID-19 caseloads spiking for most of the quarter and considerable uncertainty about the long-term impact on the economy," said Nicole LaRusso, director of Research and Analysis for the CBRE Tri-State region, in prepared remarks. "While asking rents have not yet budged as a result of the drop in market demand, we do expect them to fall by 10% to 16% by the first quarter of 2021 before beginning to recover."
Midtown Manhattan finished Q2 2020 with 1.29 million square feet of total leasing, 69% below the five-year quarterly average and a 68% decrease from the first quarter. Space additions were minimal through the first two months of the quarter, though in June, blocks of space over 50,000 square feet accounted for more than 1 million square feet of added space, raising Midtown's availability rate 40 basis points (bps) to 12.2%. The market's average asking rent remained essentially flat quarter-over-quarter, down only 1% year-over-year and remaining within 3% of its all-time high.
In Midtown South, leasing activity totaled 344,000 square feet in the second quarter of 2020, a 59% decrease from the first quarter and 74% below its five-year quarterly average. Renewals totaled 25,000 sq. ft., pushing the year-to-date total to 263,000 sq. ft. The availability rate decreased 10 bps from the previous quarter to 10.6%, however remained up 60 bps from the year prior. Average asking rents were virtually unchanged from the previous quarter in Q2 2020 at $83.34 per square foot, but up 4% year-over-year.
Q2 2020 leasing activity in the Downtown market totaled 516,000 square feet, down 56% from the first quarter and 60% below the five-year quarterly average. Tenants migrating into the market accounted for 21% of leasing activity during Q2 at 111,000 square feet, down from 34% the first quarter. The availability rate increased 50 bps quarter-over-quarter to 12.9% but decreased 10 bps from the year prior. Average asking rents remained relatively flat quarter-over-quarter and year-over-year at $62.98 per square foot.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
