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 8.0 % vacant to 8.1 % vacant
Midtown Manhattan Office leasing volume is down 31% year-over-year/ Downtown Office Leasing activity was 610,000 square feet which was above the five-year average.
Effective office rents in Manhattan increased. Incentives for free rent and landlord contributions in cash to build tenants spaces increased. Concession values, the incentives landlords offer in terms of free rent and tenant improvements, fell slightly to 13.36% of asking rents. Concessions grew 22.26%, while asking rents climbed 14.04%. This represents a considerable year-over-year increase of 14.41% [in effective rents]. Concession values held relatively steady in Midtown, where taking rents grew 4.33% on the quarter to $73.40 per square foot.
Downtown has a tighter office market than Midtown. But with new construction projects coming, there is a sense that the Downtown market is headed for an oversupply. The availability rate in Downtown dipped to 11.5%.
Midtown Manhattan Office vacancy rate increased to 11.7%. Since 2011, 340 tenants representing 11 million square feet have relocated Downtown versus 2.5 million square feet worth of tenants that have migrated out of the submarket. Midtown South had the lowest availability rate in Manhattan at 8.4%.
Total Manhattan Class A Office vacancies decreased from 8.9 % vacant to 8.8 % vacant
Downtown average effective rents grew 1.98% to $49.58 per square foot, or 18% increase year-over year.
Financial services, insurance and real estate (FIRE) industries are set to lease the most space in Manhattan in the coming years and are in the market for 8.7 million square feet. The technology, advertising, media and information (TAMI) tenants are looking for 4.3 million square feet. The leading TAMI firms are looking for more than 550,000 square feet.
Several retailers have abandoned leases “at the hub” in the shopping center at the World Trade Center transit hub. Apple is still planning on opening its new store there on a mezzanine-level space.
Manhattan’s luxury retail market is starting to show signs of cracks, and that could put active lenders at risk. While there is not a large amount of troubled loans currently, that could change quickly if the retail market turns down. The large retail lenders are exposed to a number of factors and it is going to impact their profitability.