New York Market Overview
- Total Manhattan Class A Office vacancies decreased from 8.9 % vacant to 8.8 % vacant
- Total New York City Office vacancy increased from 7.9 % vacant to 8.0 % vacant
Manhattan office leasing has gotten off to a good start in 2016, with both leasing activity and asking rents on the rise through February. Manhattan office leasing exceeded 2 million square feet in each of the first two months, a 3.2% jump from the first two months of 2015. Asking rents in all three major Manhattan submarkets also increased from last year, taking overall Manhattan asking rents to $72.80 per square foot, compared to $69.46 per square foot through February 2015. The Downtown office market, in particular, saw asking rents top $60 per square foot for the first time ever.
Landlords in Midtown are losing the power to set rents on their properties as office rents in Midtown were 7.4% less in February than they did at the end of last year (rents at an all-time high). Rents were up 13.3% over all of 2015. In Midtown, the office vacancy rate was 7.1% last month. Midtown South saw a 5.1% vacancy rate.
The new office space in the Hudson Yards is causing many Midtown office building landlords to cut rents to attract and retain tenants. Asking rents in the top buildings across Midtown dipped to around $87 per square foot in the fourth quarter of 2015, compared with $91 in the third quarter last year. Midtown took the hardest hit on rent prices. The Midtown South office market, which includes the Meatpacking District, Union Square and NoMad, held steady with asking rent remaining at $91 in the third and fourth quarters.
Manhattan is undergoing an office construction burst with 30 million square feet of new office space either being proposed, under construction or undergoing major rehabilitation. The Hudson Yards is by far the largest, followed by Downtown and Midtown. Half of the 13 million square feet of new construction currently underway is already rented.
Sales of Manhattan development sites slowed in the first months of 2016, with only $90 million worth of development deals being recorded in the borough in January and none in February. A drop in demand on tighter financing markets, weakening luxury condo sales and the expiration of the 421a tax abatement program is a factor. The average market value of development sites has fallen by 25 to 30% over the past few months. Development sites below 96th Street currently ask $800 per buildable square foot on average, the average sales price in 2015 was $610.