New York Market Overview
Manhattan Office:Manhattan office leasing volume in 2020 will be 52% lower than the year before.
3.12 million square feet of sublease space came on the market from April to September boosted sublets’ share of total availability to 23.2% from 22.1%.
A decline in Manhattan’s asking office rent average was relatively small in the second and third quarters this year 3%, partly because landlords took a “wait and see” approach during the second-quarter lockdown. In the third and fourth quarters of 2008, the average asking price dropped by 15.3%.
Although the current downturn has largely been marked by a lack of leasing, downward pressure on pricing could still intensify if more businesses downsize.
Among Manhattan’s 18 submarkets, the Plaza District’s average asking rent was mostly unchanged from April to September, but the other 17 submarkets experienced declines.
A 16.5% drop in the Penn Plaza/Garment district was mostly caused by the removal of the high-priced space at the Farley Post Office development leased to Facebook in August. The 13.7% dip in Hudson Square was primarily driven by low-priced sublet space listed at 1 Hudson Square.
One of the reasons for a steeper price decline in Midtown South was because the area was booming and the price was rising before the pandemic, creating room for the price to come down. But the Midtown market, whose older inventory was losing tenants even before the pandemic, didn’t have as much to lose from asking prices. Midtown has new construction, such as One Vanderbilt and 390 Madison Avenue, along with 1271 Avenue of Americas, which is undergoing a major renovation.
Manhattan’s office availability rate hit a high not seen in a decade. The amount of available office space rose to 12.9%, the highest since 2004. The glut of available space persisted even as leasing volume rose. It was up by 57.1% to 1.76 million square feet compared to the month prior. It is still less than a half of what it was a year ago. The Midtown South market accounted for more than half of Manhattan’s overall lease activity. But even in that submarket, the availability rate rose to a record high of 12.1%, up by nearly 49% from a year ago. The average asking price is down to $72.26 per square foot, a 10% decline from last year. The sharp decline in price was due because Midtown South has become a popular office location, which has led to a spike in pricing.
In Midtown East, subleases account for 23% of the total office availability and some spaces can be had for more than 50% below asking rents.
With only 10% of Manhattan workers back in their offices, companies are rethinking their footprint, leading to a surge of spaces available for sublease. As of October, more than 16 million square feet of office space was available for sublease.