Manhattan Office Poised to Have Its Best Leasing Year Since 2019
Avison Young seeing tenants willing to sign large commitments for longer lease terms than they were last year.
Leasing activity is increasing in a big way in Manhattan, according to Avison Young’s Third Quarter Office Market Report.
Overall, the higher levels of availability from the past few quarters are falling, and in Q3, Manhattan registered its first quarter-over-quarter decrease of 2022, by 18.4%, signaling stronger occupancy.
Large transactions also continue to bolster its leasing activity, with 33 deals over 100,000-square-feet (sf) have been signed between Q1 and Q3. There were 20 in total in 2021.
Danny Mangru, innovation & insights regional manager of the firm’s New York City office, said in prepared remarks that the Manhattan office market “is on track to have its best year of leasing activity since 2019.”
Mangru said that Avison Young is seeing tenants willing to sign large commitments for longer lease terms than they were last year and as these numbers rise, along with return to office efforts hovering around 50%, “we should expect strong demand to continue through year-end.”
The report also outlines the widening of the gap between class A net effective and base rents, as occupiers in this sector are shifting demand toward higher quality assets.
The gap between base and net effective rents has widened from $9.83 per-square-foot (psf) to $18.18-psf, according to the report.
“Net effective rents have leveled due to base rents incrementally trending upward along with historically large concessions packages, which are being offered to induce tenant commitments as a strategy to remain competitive,” Avison Young reported.
In New Jersey, ‘In-Person’ Industries Driving Leasing Activity
In New Jersey, though asking rents decreased slightly quarter-over-quarter at $27.76 per square-foot (sf) on average, high-quality product continues to display more resilience to the pricing downturn, according to Avison Young.
Jeff Heller, principal and managing director of the firm’s City office, said in prepared remarks that it “comes as no surprise that those companies who have traditionally relied on more in-person interaction, like those in healthcare, finance, and life sciences, for instance, are driving the bulk of leasing activity across New Jersey.
“Those choosing to stay in place, especially in the technology sector, however, are consolidating and returning space back to market. This quarter, we’ve reported that over 2 million-sf of office space has been given back.”
Additionally, nearly 1 million-sf of office space has come off the market quarter-over-quarter, resulting in vacancy rates having risen only 0.6% quarter-over-quarter.