New York Market Overview
- Total Manhattan Class A Office vacancies stayed at 8.8 % vacant
- Total New York City Office vacancy stayed at 8.0 % vacant
The Manhattan office market is showing signs of a slowing down as landlords put more space on the market than tenants took for the first time since the first quarter of 2013. In the first quarter of this year, 6.6 million square feet was leased, a decrease from 7 million square feet during the first quarter of last year, though above the historical average of 6.2 million square feet. Around 806,000 more square feet of office space was put on the market than was leased.
Overall asking rents are up to $72.40.
Midtown's Manhattan office vacancy rate increased to 9.3% from 8.8% from the previous quarter. In February, Midtown office rent dropped with tenants paying 7.4% less than they did at the end of last year. Midtown, which has faced increased competition from boutique office space in the Meatpacking District and upcoming developments such as Hudson Yards, has been cutting rents to keep and attract tenants.
Renewals made up the majority of office leases, and asking rents for all types were up in the first quarter. Landlords are reducing office rents as vacancy rises. Asking rents for Class A space was up 1% to $81.09 per square foot in the first quarter, despite rent decreases.
The wave of new hotel construction in New York which peaked in 2014 is finally over as developers stop announcing new developments. There were only 6 new hospitality properties (512 units) citywide in the first three months of 2016.
Citing a continuing slowdown in both transaction volume and value appreciation, commercial property values fell slightly to less than one-half percent. Though the current commercial real estate cycle has seen property values eclipse their pre-recession peak in 2007, the slight decline in the national property index feeds into previous forecasts that the cycle may have reached its conclusion in 2016. But despite indicators property values at large appear to be holding their ground due to financial and securities markets that have stabilized. The rally in the financial markets and the return of CMBS seemed to have helped property pricing.
U.S. commercial real estate prices fell slightly in January and February driven by weakness in Manhattan. There was a decline in investment sales volume while prices only fell by 1% for office buildings and 5.2% since December. Expect investment sales volume in Manhattan and surrounding boroughs to drop by as much as 30% in 2016 after a $75.5 billion year in 2015.