Manhattan Office Market Strengthens in July

Office leasing in Manhattan continues to rebound in 2022, says a new report from Colliers. Leasing activity hit 3.16 million square feet in July and was the strongest monthly leasing since January 2020. That’s up 42.8% over June and 34.4% year over year.

However, while the rebound has brought relative improvement, it doesn’t mean that happy days are again here. “Although July’s velocity surpassed the 2020 (1.58 million square feet) and 2021 (2.08 million square feet) average monthly volume, it was 11.6% below the 2019 pre-pandemic average (3.58 million square feet),” the report read.”

The number varied by area, with apparent shifting in tenant choices happening. Midtown saw the biggest jump, with close to 3.3 times as much space leased in July 2022 compared to the year before. Both Midtown South and Downtown saw significant drops; the former was at 76.4% of the year before, and the latter at 58.2%.

Availability got tighter by 20 basis points while absorption was 1.09 million square feet, the strongest that figure has been since August 2021. Still, overall availability is at 91.66 million square feet, up by 70.2% since March 2022.

In Midtown, availability was 16.0% compared to 17.5% the year before. Midtown saw an increase year over year from 16.1% to 16.4%. Similarly, Downtown went from 18.3% to 20.1%.

Sublet availability was also down, by 0.37 million square feet, but that’s not as encouraging as one might hope. The number was still 95% of the 21.16 million square feet peek in July 2021.

Asking rents in dollars per square foot per year were up across the board: $78.95 to $79.86 in Midtown, $73.12 to $81.06 in Midtown South, and $58.80 to $59.47 Downtown. On the average for Manhattan, office rents went from $72.72 to $75.43.

There are still too many unknowns to predict what will happen going forward in the office market. Researchers from the NYU Stern School of Business and the Columbia University Graduate School of Business recently estimated that work-from-home trends since the pandemic have caused significant changes in “lease revenues, office occupancy, lease renewal rates, lease durations, and market rents” and that in the long run the national market will see a 28% decline in values.

It’s not the only CRE sector that is seeing potential changes. Amazon, which was a large driver of warehouse demand and also pricing, with its willingness to spend over market prices, has said it is cutting spending on warehouses and increasing it in data centers. And multifamily lending looks to slow during the rest of this year.