Manhattan Office Sees Highest Net Absorption Levels in Decade

Demand for office in Manhattan is picking up to levels not seen in 10 years as the sector continues to recover from the pandemic, according to the latest market report from Transwestern.

Net absorption in the city exploded to 5.7 million square feet in the three months ending September- the highest levels seen in a decade said the commercial real estate agency.  That’s a massive turnaround from the negative 292,131 SF in the previous quarter. Year-to-date, net absorption is now at 2.7 million SF in Manhattan.

The strong performance for demand in the third quarter came primarily “from the withdrawal of offered space where buildings are preparing for sale, conversions or renovations,” Transwestern wrote.

Also, the availability rate dropped to 17.8 percent, marking the lowest level since 2021. Plus, the sublet category rate of 4.1 percent plunged to a four-year low.

Leasing has also been strong, with activity in the year-to-date through September at 21.7 million SF, surging 31 percent from a year ago.

“This quarter’s strong leasing figure, particularly the year-to-date increase compared to last year, bears out the increased enthusiasm that has been noticeable in the market,” said Patrick Heeg, partner at Transwestern.

“We’ve been seeing leasing decisions being made faster, increased touring activity, and greater openness to longer terms. As tenants solidify their in-office work plans, they are in a much better position when entering lease negotiations.”

Blackstone owned the biggest lease of the third quarter after renewing and expanding a property that exceeds one million square feet. That was followed by Christie’s and its renewal of a 373,000 SF space, and Willkie Farr & Gallagher, which renewed a 333,450 SF lease. Those top three deals all occurred in Midtown.

Office asking rents were $76.55 compared with $74.54 in the third quarter of 2023. Meanwhile, vacancies ticked up from 16.4 percent in the same quarter last year to 17.3 percent in the three months through September.

While Manhattan’s office market picked up quite the steam last quarter, it remains to be seen if it can be followed up in the coming months.

“Quarterly leasing activity is heating up, availability is tightening, and asking rents are up – all measures of a positive market,” Corrie Slewett, research manager at Transwestern said.

“As is usually the case, the next two quarters will clarify if 2024’s third-quarter performance marked the start of a positive trend.”

Transwestern over the next 12 months is forecasting gains for net absorption, construction, asking rents, and sales volume.