Manhattan Office Availability Rates Hit 3-Year Low
The office market is starting to boom again, as leases are up 25 percent year-over-year.
Manhattan’s office market is starting to boom again, as leasing appetite in the city has picked up, with properties leading the way, according to a report from Avison Young.
Total leasing activity in Manhattan for the third quarter hit 23.1 million square feet, marking a 25 percent year-over-year increase. This was driven by 100,000-plus square feet office assets, which leaped from 18 to 25 transactions in the third quarter.
“This increase in large-block leasing activity has strongly contributed to 2024’s leasing activity significantly outpacing 2023,” Avison wrote.
Availability rates have dropped below 19 percent for the first quarterly period since the three months through 2021. In the third quarter of this year, the rate was 18.7 percent.
To speak further on Manhattan’s office strength, the market in August was found to be 73.4 percent as busy compared with the same month in 2019. That’s up significantly from the national average of 60.4 percent. Midtown West and Central Park regions have been the busiest areas, with levels rising 21.3 percent and 12.7 percent year-over-year, respectively.
“Much of Manhattan’s office strength can be attributed to banking/finance and government tenants that have been the foundation of the Manhattan office market for decades,” said Avison.
Interestingly, consulting, accounting, research, and recruiting professions in Manhattan office buildings are seeing more visitations now, with the number being 112.3 percent of August 2019 levels. Government ranks second at 87.7 percent, while banking, finance real estate and insurance industries are at 87.6 percent. The lowest activity comes from the consumer durables and large ticket products space, which is only operating at 46.6 percent of August 2019 levels.
As far as days of the week go in Manhattan, Tuesday is the most popular one for work in the office at 80 percent occupancy, followed by Wednesday at 78.8 percent. Friday is the slowest at 59.7 percent, and Monday is next at 67.7 percent. Many employers seem to be making a hybrid schedule work, according to Avison.
Direct annual rent per square foot full service in Manhattan was $82.39. Midtown South had the largest asks at $93.66, while Downtown saw the lowest at $66.71.
When compared with the national average, office recovery in Manhattan has been strong, and developers focused on the asset class and will hope it continues. The city is a huge market and a big opportunity for investors.