New York Market Overview
Manhattan Office:Manhattan Office leasing was 2.39 million square feet, a sharp increase from June but less than ½ from a year ago Leasing was driven by renewals, including several short-term extensions.
Net sublet availability went up by nearly 1 million square feet, reaching 22% of total availability. Manhattan has yet to see a widely expected increase in sublet availability.
Monthly absorption was negative 2.25 million square feet as new office construction came online, and the average asking rent went down by 0.4% since June to $79 per square foot.
Of New York City’s major employers, only 8% of their employees have returned to workplaces. 26% of them are expected back by the end of the year, and 54% by July 2021. One exception was the real estate industry, where 53% of workers are already at their desks and 94% are anticipated to return sometime this year.
During the second quarter, Vornado collected 88% of rent due from tenants, or 94% including rent deferrals. This consisted of 93% from office tenants (98 with deferrals) and 72% from retail tenants (78 with deferrals). Deferred rent is generally required to be paid back over a 12-month period.
Manhattan Retail:The economic toll on commercial real estate shows no signs of abating as the health crisis lingers. Indexes for office, retail and lodging properties were all lower in July than they were a year ago.
Covid has decimated retail and restaurants. Recent bankruptcy includes: Lord & Taylor, Men’s Wearhouse, Ann Taylor and Lane Bryant plus The Wainscott Il Mulino outpost and six other restaurants. As bankruptcies skyrocket in recent months, a key benefit is the ability to exit pricey, multi-year leases.
East 57th to 72nd Street on Madison Avenue saw a recent record high of nearly 33% vacancy. Fifth Avenue had 22 vacant stores.
For luxury retailers, Fifth Avenue landlords were giving checks for interior re-designs, moving costs and other expenses rather than slashing rents to avoid vacancies.
Some retail landlords are offering additional concessions to tenants in case the government mandates another Covid-related shutdown. Landlords are including language in new leases that allows retail tenants to defer part of their rent if the government requires store closures. Many insurance policies did not cover pandemic-related losses.