Manhattan Office Leasing Could Be Looking Up

Office leasing activity in Manhattan could be turning a tide. An October report from Colliers International shows a 57.4% increase in office leasing for the month compared to September. Four large office leases drove activity in the market, including NYU Langone’s 633,000-square-foot lease renewal at 1 Park Avenue. This lease was also notable because it was the second largest lease to close this year.

These four leases were concentrated in Downtown and Midtown South, both of which had increased leasing activity. Midtown South’s leasing volume totaled 1.22 million square feet, the highest so far this year. This accounted for 70% of the leasing activity in October, deals that included NYU Langone’s lease as well as leases by Centric Brands, Li & Fung and Noom. In Downtown, leasing volume increased nearly 60% over September, including a 71,000-square-foot lease by Topps Co. at 1 Whitehall Street, the largest for the month in the market.

While there were come positive signs of movement after a near halt in activity, Manhattan is still far from recovery. Year-over-year leasing volume decreased 54% for the greater market, bringing the vacancy rate to 12.9%, the highest since 2004. In addition, sublease supply is the highest since 2009, pushing monthly absorption into the red for the eighth consecutive month and rental rates down 1.2%. Even in improving submarkets like Downtown and Midtown South, year-over-year leasing activity was down. The vacancy rate in both markets also increased as rental rates decreased—a trend throughout the market.

Other submarkets continued to have declining leasing activity both year-over-year and month-over month. Midtown leasing activity fell 63.4% in the month and remained a fraction of the activity on October 2019, according to the Colliers report, when leasing activity totaled 1.74 million square feet. The largest transaction in the market for October was the 36,000-square-foot lease renewal by BBC Studios. The vacancy rate in the submarket increased 13.9%, the highest rate since 2009 as several pieces of new inventory was added to the market. Rental rates also decreased 1.2%, on par with the rental rate decrease with the greater market.

It is also important to note that of the five top leases in October, four were lease renewals. Noom’s 113,000-square-foot lease at 5 Manhattan West was the only significant new lease signed in Manhattan in October. As mentioned earlier, the lease was in Midtown South.

An earlier report from Newmark Knight Frank showed office leasing activity was down 70% for the year in Manhattan. Office leasing has been volatile. In July, activity showed signs of a rebound, before falling again in August. This seems to be the trend in the market while the pandemic remains a reality.