Manhattan’s Office Market Slump Got Even Worse in Q4

The Manhattan office market continues to reel from the impacts of COVID-19, with net absorption in the fourth quarter of 2020 clocking in at negative 10.6 million square feet, the highest negative total recorded since early 2009 at the peak of the Great Recession.

A new report from Colliers shows that overall, the Manhattan office sector showed rising vacancy (an uptick by 40 basis points to 8%), a 3.5% fall in asking rents to $75.39 per square foot, and the aforementioned negative absorption, which Colliers deems “significant”. (Despite that, Manhattan has the lowest vacancy rate of the markets tracked by the Colliers report.)

Total leasing activity over the quarter totaled 4.2 million square feet, a decrease of 13.4% from the prior quarter and two-thirds lower than the Q4 2019 level. Overall, Manhattan leasing volume rang in at 18.9 million square feet, the lowest level so far this century. And the dip in asking rents was the biggest quarterly reduction since 2009; average sublease rents are now 59.64 per square foot, with sublease space flooding the market and accounting for 24.2% of all availability.

Noteworthy lease renewals included NYU Langone’s recommitment to 632,628 square feet at 1 Park Avenue in Murray Hill; Justworks Inc.’s 270,000 square feet renewal at 55 Water Street in the Financial District; and Centric Brands Inc.’s 212,154 square feet lease renewal at 350 Fifth Avenue in the Penn Plaza/Garment District submarket.

Despite these dire straits, though, brokers are expressing renewed confidence in the ability of Manhattan’s office market to rebound. The Real Estate Board of New York reported in February that its Commercial Broker Confidence Index increased 34% from Q3 to 2.89.