New York Market OverviewOffice
A surge of new supply in Manhattan’s office market is starting to make a dent on rents. With millions of square feet in new office space being built at Hudson Yards and the World Trade Center complex, some market observers are warning of a supply glut.
Manhattan office market has had a negative absorption rate, as leasing activity through the third quarter has not been able to keep pace with additional supply. Absorption year-to-date sits at negative 2.2 million square feet.
The Downtown office market shows positive absorption of nearly 570,000 square feet, while both Midtown and Midtown South were negative. The average asking rent in Manhattan climbed to $73.85 due to rising rents in Downtown and Midtown South.
In Midtown and Midtown South, one quarter of the square footage is repriced up ward, another quarter the net balance moves lower. Downtown, landlords push available office space upward for three consecutive quarters.
Midtown South office rents remained largely unchanged at $69.13 per square foot. Union Square’s leasing activity surpassed the previous quarter and availability in the third quarter reached its highest level since 2014.
Leasing at Hudson Yards boosted activity in the third quarter, while asking rents remained at $81.44 per square foot and no new space is hitting the market until the end of 2017.
Downtown office Leasing activity slowed in the third quarter with asking rents at $57.50 per square foot.
The average asking rent for Class A office space in Midtown South was $83.19 per square foot in the third quarter and $81.67 in the second quarter.
In Midtown, it was $81.91 in the third quarter and $81.19 in the second quarter. Since 2013, Midtown South has added about 14 million square feet of office space, growing about 90% to 28.8 million square feet. By comparison, Midtown has about 193 million square feet of prime office space, but even its premier districts are lagging trendier ones further south.
Asking rents in the Plaza District, which has about 86 million square feet, averaged $88.23 per square foot.
Empty storefronts are plaguing much of Manhattan, as rents rise and retailers struggle to compete with e-commerce and less demand for luxury products. In some cases, rents need to come down 30% or more for rents to be at levels where retailers can make sense of them again. Asking rents in Soho and Times Square have declined throughout 2016. Retail Spaces along Fifth Avenue from 49th to 60th streets, one of the priciest retail locations in the world, have an average asking rent of $3,213 a square foot.