January 11, 2018
New York City – More than 28 million square feet of leasing activity in 2017 stemmed from the demand for new construction and majorly renovated properties, according to Transwestern’s fourth quarter 2017 report on the Manhattan office market. This demand drove two consecutive quarters of positive net absorption, not seen in the Manhattan market since 2015.
“Strong leasing activity seen during the past two quarters has been driven by the demand for new product by large users and fueled from the strong employment growth witnessed through 2017,” said Danny Mangru, Research Manager at Transwestern. “Six sectors posted job growth during the past year, driving up demand from large users over 50,000 square feet, which accounted for the majority of leasing activity this quarter.”
New York saw eight large-block leases exceeding 100,000 square feet, a significant driver for the market’s positive performance in fourth quarter. Despite the robust quarter for leasing, the average asking rent remained relatively flat in Manhattan through the end of 2017. Additional highlights from the report include the following.
· Fourth quarter 2017 witnessed eight transactions exceeding 100,000 square feet for a total of 850,405 square feet of positive net absorption, marking the first time since 2015 that the market has seen consecutive quarters of positive absorption.
· Midtown continued to benefit from the demand of new construction and majorly renovated properties, a trend that has dominated the submarket this year, recording five transactions exceeding 100,000 square feet and posting 621,350 square feet of positive net absorption.
· Midtown South saw a resurgence in leasing activity, recording two transactions exceeding 100,000 square feet for a total of 258,376 square feet of positive net absorption.
· Despite a relatively healthy quarter of leasing, Downtown posted 29,321 square feet of negative net absorption, occurring mostly in the Financial District.
Manhattan’s availability rate decreased 20 basis points to 11.1 percent.
Availability rates for both Midtown and Midtown South decreased by 30 basis points, ending the quarter at 10.6 percent and 9.4 percent, respectively.
Manhattan added 1.4 million square feet of newly available direct space.
Midtown’s East Side and Penn Plaza and Downtown’s Financial District and World Trade Center witnessed the largest increase in newly available space.
AVERAGE ASKING RENT
· The average asking rental rate was essentially flat quarter over quarter, ending at $73.89 per square foot.
· Midtown had relatively minimal movement in asking rents, ending the quarter at $79.65 per square foot.
· Downtown asking rents were up 2 percent from third quarter, driven by the addition of 227,000 square feet priced above $70 in the World Trade Center submarket, ending the quarter at $64.78 per square foot.
· Midtown South ended the quarter at $71.70 per square foot, down 2 percent from third quarter, driven by the 107,000-square-foot Flatiron Health lease at 161 Avenue of the Americas, which was priced upward of $90 per square foot.
“I’m mildly optimistic for the balance of 2018 and expect strong demand for new construction and majorly renovated properties will continue to drive leasing,” said Mangru. “As tenants start to move into these demand drivers, we will see an uptick in older product availability and sublease space as a result of this flight to quality.”
ABOUT TRANSWESTERN CONSULTING GROUP
Transwestern Consulting Group works with owners and occupiers of real estate to design and execute customized, labor-centric strategies that consider corporate objectives, economic drivers and industry trends to solve complex business challenges. Using a data-driven approach, our dedicated team of multi-market specialists integrates transactional expertise with the appropriate mix of site selection and demographic analyses; financial modeling; supply chain management; incentives negotiation; portfolio optimization; workplace strategy; and branding solutions for the achievement of each client’s goals.
Transwestern is a privately held real estate firm of collaborative entrepreneurs whodeliver a higher level of personalized service – the Transwestern Experience. Specializing in Agency Leasing, Tenant Advisory, Capital Markets, Asset Services and Research, our fully integrated global enterprise adds value for investors, owners and occupiers of all commercial property types. We leverage market insights and operational expertise from members of the Transwestern family of companies specializing in development, real estate investment management and research. Based in Houston, Transwestern has 35 U.S. offices and assists clients through more than 180 offices in 37 countries as part of a strategic alliance with BNP Paribas Real Estate. Experience Extraordinary at transwestern.com and @Transwestern. For updates from the New York office, follow @TranswesternNYC.
Kelsey Da Silva