Manhattan office leasing activity declined in August after improving in July. Research from Newmark Knight Frank shows that the office leasing activity during the coronavirus pandemic is down nearly 70% with 8.9 million square feet in transactions, a total of 621 deals. In July, activity began to rebound—showing potential promise for the market—with 2.9 million square feet of deals. However, activity fell again in August with only 1.4 million square feet of leasing deals during the month.

As office leasing activity declines, new trends have also emerged during the pandemic. Relocations have slowed compared to a year ago. Of the lease transactions greater than 10,000 square feet, 63.9% were relocation deals, down from 72.2% the same time last year. Most tenants are putting leasing activity on hold, and at least 36 major tenants in the market have announced plans to hold off on office leases until there is more certainty in the market. In addition, tenants are beginning to favor short-term leases. Nearly half—48.5%—of leases were signed for five years of less. By comparison, 28.1% of deals in the first quarter of the year were for five years or less.

The trend toward short-term leases is particularly concerning because it could delay the office market recovery, according to the report. NBC/Comcast, Mitsubishi International Corp. and GoodwinProcter LLP are among the tenants to sign short-term leases. This change in lease duration will likely last into 2021 and potentially through the pandemic. As a result, it could take several years to see leasing activity rebound.