Manhattan Office Leasing Rebounds in Q2

Two quarterly reports from Savills and Colliers underscore an improvement in Manhattan’s office leasing market, albeit at a pace that is still not likely to meet pre-pandemic norms.

Manhattan office leasing velocity totaled 8.7 million square feet in Q2, according to Savills, with leasing for the first half of 2024 totaling 15.5 msf and increased 8.9% from H1 2023, Savills said. It added that the quarterly leasing was still 6.3% shy of the pre-pandemic Q2 average, with Colliers noting that if Manhattan’s leasing volume were to continue at the same pace for the second half of the year, full-year 2024 leasing velocity would still fall approximately one-third below full-year 2019 activity.

Bloomberg’s 946,815-square foot renewal at 731 Lexington Avenue was the largest lease of the quarter by a considerable margin and contributed to the stronger total leasing volume, Savills said.

It also noted that a significant developing theme this quarter was the expansionary nature of most large leases. Of the 25 leases signed this quarter 50,000 sf or greater, 18 of them represented an increase in size, with tenants growing their footprint through a combination of relocations, expansions, and new location openings. Subleasing activity totaled 1.5 msf or 17.7% of total leasing volume, just 10 basis points (bps) higher than its share last quarter.

Savills reported that Class A availability declined, while Class B/C availability crept up and that the overall availability rate ticked down 10 bps from a quarter ago to 20.0%. The decline is attributed to the Class A market availability rate which fell 40 bps to 20.0%, while Class B/C availability increased 30 bps to 20.1%.

“Tenant activity was clearly more concentrated in higher quality buildings this quarter, as Class A leasing accounted for 67.6% of the total, despite such buildings only accounting for 57.4% of inventory,” Savills said.