The Office Saga Continues For Beleaguered Lower Manhattan

The office scene in downtown Manhattan continued its COVID spiral in the first quarter, with leasing activity coming in at less than half of Q4 2020 volume and nearly four-fifths lower year-over-year.

A new report from Colliers shows that Lower Manhattan’s office leasing activity this quarter was 0.35 million square feet, down from 0.75 million square feet in the fourth quarter and staggeringly lower than the 1.69 million square feet recorded pre-pandemic in the first quarter of 2020. The leasing velocity this quarter was also a fraction of the pre-pandemic quarterly average, the report states, and Lower Manhattan’s availability rate increased by 2.6 percentage points to 16.5%, the highest quarterly rate since 2013. Net availability in the submarket increased by 61.5% over Q1 2020 numbers.

The first quarter numbers were particularly low due to a lack of high-profile, blockbuster deals. Q1 leasing volume did not include any transactions at the 250,000+ or 100,000+ square foot levels; the biggest leases included the State of New York’s 65,000 square foot new lease at 199 Church Street, a 27,000 square foot renewal by IPC systems at 1 State Street Plaza and a 27,000 square foot renewal by Public Health Solutions at 40 Worth Street. The public sector led leasing for the region, accounting for 40% of activity in Lower Manhattan during the quarter.

The Financial District also led the submarket, driven by leases by IPC Systems, Pitta, and Radancy. These transactions accounted for more than half of all activity in the region during Q1.

Notably, the asking rent decreased by 2.9% since December to $60.57 per square foot, the lowest average since Q4 2016, and an amount that’s down nearly 8% year over year. A glut of below-market and sublet space was also added to the market, with the later representing 30.5% of overall availability and forcing lower repricing across various portions of the submarket.  Class A and B asking rents went down 3% from December figures, while Class C averages went up 2.8%.

Absorption was negative 2.86 million square feet, the highest number since 2011.