New York Market Overview
Manhattan Office:
At the current rate of office leasing, leasing volume in 2020 would be the lowest in the last 20 years. The third quarter saw 4.81 million square feet of office leasing, just half of what was leased during the same time last year. The year’s total is 14.81 million square feet so far and is down 50% from the same period in 2019.There are 16.1 million square feet of Sublease space in Manhattan or 27% of the total available office space. This is a 47% increase year-over-year, far outpacing the 14% increase in direct space availability over the same period. TAMI tenants now account for 45% of sublease additions since Covid, more than twice as much as any other sector.
Midtown South and Downtown have higher office sublease availability now than they did at the peak of the last financial crisis, but haven’t yet reached the levels seen after the dot-com crash and 9/11 attacks. Midtown is still a few million square feet short of the subleasing availability peak it reached in 2009.
E-commerce companies dominated in new leases signed with leasing activity in that sector reflecting an uptick in demand, from home-bound shoppers who are making more purchases online.
Manhattan office leasing was down 50% year-over-year during the third quarter.
Manhattan Retail:
Manhattan retail asking rents fell to their lowest point in nearly a decade, as the pandemic compounded a downward demand.Asking rents across Manhattan’s 16 main shopping corridors fell to $659 per square foot during the third quarter, down 12.8% from the same time last year, and the lowest level since the back half of 2011.
Retailers in Times Square are vacating and landlords are finding it difficult to find new tenants.
Some activists, believing rents have not fallen enough to fill vacancies, have proposed measures to force landlords to reduce asking prices. Retail asking rents have dropped for 12 consecutive quarters.
Buildings Sales:
There were just 21 commercial real estate transactions in the third quarter of 2020. That’s the lowest number of deals recorded since the third quarter of 2009. There were 37 sales in the third quarter, down from 55 in the second, and the total value of sales decreased to $1.6 billion from $2.1 billion.Investment Sales volume in Manhattan declined to $1.1 billion, a 74% decrease from the previous year. Two deals accounted for that: Savanna’s deal to buy 1375 Broadway for $435 million from Westbrook Partners, and RFR Realty’s purchase of 522 Fifth Avenue from Morgan Stanley for $350 million. Those deals were under contract prior to the coronavirus.
There were big drops for property types within the commercial sector: Development sales volume totaled $141 million, a 56% drop from the previous year. Retail saw only one transaction during the quarter, a $1.5 million deal sold in foreclosure. If this downward trend continues, commercial sales volume could total $8.4 billion in 2020. That would be a 69% drop from the 10-year average.
