Manhattan office leasing demand has returned to pre-pandemic levels despite remote work becoming more popular since then.
A recent report from Savills analyzed the performance of the city for the asset class in the third quarter. Leasing velocity at 9.5 million square feet was the strongest quarterly volume since the three months ending December 2019. That’s nearly a five-year high.
Also, Savills said: “Leasing volume now totals 25.0 msf through the first three quarters of the year, putting Manhattan on track for its strongest leasing year post the start of the pandemic.”
The biggest deal in the three months through September went to Blackstone, which renewed and expanded a roughly 1.06 million SF lease. The largest alternative global asset manager was followed by Ares Management, Willkie Farr & Gallagher, and Christie’s, which each exceeded 300,000 SF for their properties. Also, financial services tenants secured 38.8 percent of Manhattan’s total leasing volume and controlled four of the largest 10 ones in the city for the third quarter.
For office rent, however, it was a mixed bag. Overall rents in Manhattan dropped by 0.9 percent to $75.91 per SF. Class A assets in Midtown saw a 0.6 percent dip to $92.67 per SF. Manhattan average prices for B/C properties just inched up 0.1 percent to $56.35 per SF.
Availability remained steady at B/C properties at 20.1 percent, while Class A’s took a 70 basis point plunge to 19.3 percent. Also, sublet space at 19.7 million SF experienced its lowest levels since the end of 2021.
As far as an outlook goes, Savills expects tenants will implement legal guarantees for work allowances in lease discussions, noting that debt and financing have obstacles for office operators. The real estate services firm also sees large building owners moving to “increasingly” team up with developers to modernize older properties.
The report from Savills comes as Manhattan offices continue to see more visits. For July, this category set a new post-pandemic record - although visitation was still only 72 percent of 2019 levels.
Other markets continue to fare better in getting employees back for in-person work, like South Florida. At least nine in 10 employees are back in the office versus pre-pandemic levels to lead the nation, according to the Fort Lauderdale Downtown Development Authority. So it remains to be seen, will New York’s office asset class see a big revival one day as in The Sunshine State? Or is around 70 percent occupancy the peak, and new reality for The Big Apple?