Office Leasing Activity Surges in Manhattan
Monthly velocity doubled in July to more than 3M SF, strongest volume since January 2020.
Office leasing activity in Manhattan nearly doubled in July, surging to 3.16M SF from June’s total of 2.2M and almost 1M SF more than the activity recorded in July 2021, according to Colliers.
The overall July leasing activity in Manhattan was the strongest monthly leasing total since January 2020. Although the leasing velocity in Manhattan surpassed average monthly totals in each of the past two years, it was still 11.6% below the 2019 pre-pandemic average of 3.58M SF.
Midtown offices led the leasing surge in July with 1.98M SF in leasing activity, with Midtown South leases totaling 707K SF and Downtown offices recording 480K SF in leasing, Colliers Manhattan Office Space Market Snapshot said.
The July leasing activity in Midtown was the highest monthly office leasing volume for the submarket since December 2018.
Absorption was positive in Manhattan last month at 1.09M SF, the strongest monthly positive absorption since August 2021. Despite these indications of recovery, overall availability has grown more than 70% since the beginning of the pandemic to more than 91M SF.
The overall availability rate in Manhattan dipped to 17% from June’s level of 17.2%. The availability rate in the Midtown and Midtown South office submarkets dipped slightly in July to 16% and 16.4%, while availability Downtown remained static at 20.1%.
Net sublease availability dipped to 20.1M SF in July, still only 5% less than the pandemic peak of 21.2M SF in July 2021. Manhattan’s total sublet inventory has increased by nearly 69% since July 2021.
Average asking rents in Manhattan dipped to $75.43 from $75.61 in June, but rents remained higher than the July 2021 level of $72.72, Colliers said. Rents in Manhattan remain about 5% lower than pre-pandemic levels.
The top five office lease transactions in Manhattan in July included Datadog’s 330K SF lease at 620 Eighth Ave., which represented a renewal with expanded space; Indeed’s 274K SF lease at 1120 Avenue of the Americas, also an expanded renewal; Katz Media Group’s 227K SF renewal at 125 W. 55th St.; Jane Street Capital’s expansion into 156K SF at 250 Vesey Street; and Verizon’s new 144K SF lease at 620 Twelfth Avenue.
According to Colliers, average lease terms in Manhattan—which dropped below 10 years in 2020 and 2021—are lengthening, especially for larger firms who see current market conditions as an opportune time to lock in large, prime spaces at favorable prices. Startups and smaller businesses still prefer to sign shorter-term leases.
New supply has by nearly 40% in Midtown since March 2020, while Midtown South has doubled its office supply and Lower Manhattan increased by 97% during the same period.