New York Market Overview
Manhattan Office:Manhattan’s office availability hit a record high of 14.3%, 16.3% higher than the third quarter and up 43% from a year ago. A big chunk of that 24.2% was sublet inventory, which expanded by 6.45 million square feet in the past year.
Overall, the pandemic left a large scar in Manhattan’s office market in 2020, reducing the annual leasing volume to 18.9 million square feet, down by 56% from a year ago.
Leasing Sublease space in Manhattan’s office market continued to grow in the last quarter of the year, and has now reached the highest level this century.
Americans are divided on whether to return to the office and on the reasons for their choice. Fifty-two percent of respondents on a large annual survey are choosing to work from home, and of those, 58% cited Covid-19 risks while commuting or working as a reason. One in three remote workers cited an enhanced work-life balance, while 26% said they are more productive at home. Of the 48% who have returned to the office, 42% said they are more productive there, 34% said their employer made them feel safe and 22% said it made for a healthier work-life balance.
Available sublet space in the borough reached 18.6 million square feet at the end of 2020, a 47% increase year-over-year. This outpaced the growth in direct available office space, which increased 32.1% over the same period. Sublet supply’s share of total available space now stands at 27.2%, still short of the 2009 peak of 30.3%.
Technology, advertising, media, and information (TAMI) tenants accounted for 41.8% of newly available sublease space, followed by financial services and insurance at 17.6% and retailers and luxury brands at 13.2%.velocity has been spiraling downward, with the number of available ground-floor storefronts jumped 3.9%, from 254 to 264 which is a new high for availability in the borough.
Manhattan Retail:Manhattan retail corridors saw their average asking rents drop from the same time last year, with those decreases ranging from 1 to 25%. Eight of the retail regions tracked Soho, Fifth Avenue and Madison Avenue saw the lowest asking rents in at least a decade.
The average retail asking rent in Manhattan’s 16 retail corridors dropped nearly 10% year over year to $652 per square foot. That’s a slight drop from Q3’s $659 per square foot, marking the lowest rents have been since 2011. In some neighborhoods, rents were slashed nearly in half. On Prince Street in Soho, asking rents fell from $719 to $423 per square foot year-over-year.
Retail spending was up, with quarterly sales increasing 8.6% to $35.4 billion. The unemployment rate dropped roughly 4 basis points to 12.1%.
On Bleecker Street, the average asking rent, has declined 46% since 2015, from $468 to $252. The drop was even more striking along 57th Street, where asking rents dropped 61% from $1,600 in 2015 to just $633 in 2020. Available retail space is also on the rise, with 11 corridors seeing increases in availability ranging from 6 to 67%.
Broadway between Battery Park and Chambers Street had 28 available spaces. Madison Avenue had 55. (The latter’s business improvement district recently developed a blueprint to transform those vacant storefronts into pop-ups.)
The strip of Broadway between Houston and Broome streets saw the biggest decline. Asking rents dropped to $367 per square foot, a 25% decrease over the same period in 2019. That is the lowest the rent has been since 2006.
On Fifth Avenue, the average asking rent hit $271 per square foot, a 22% year-over-year decline. Madison Avenue saw asking rents drop to $784 per square foot, a 13% decline.
The holidays are typically a bright spot for retailers but with little foot traffic returning to Manhattan, the fourth quarter of 2020 was instead filled with uncertainty and distress.
Building Sales:Recent sales include a Tribeca retail space that sold for $3,900 per square foot.
Life sciences investment, as a percentage of total office volume, reached a record high of 16.4% in 2020, more than double the 2019 figure, as $15 billion of fundraising and $10 billion of closed real estate transactions. With outfitting and zoning prerequisites, converting some commercial spaces, such as retail, could be difficult.