Decreasing Sublease Availability, Longer Term Deals Providing Market Confidence
April 11, 2024
NEW YORK CITY – The Manhattan office market opened 2024 with a subdued quarter, posting 5.3 million square feet in leasing activity, representing a 3.5% drop year-over-year. The market also saw an increase in the availability rate and notable negative absorption, though an increase in rents and decrease in sublease availability provided signs of strength, according to research from Transwestern Real Estate Services (TRS).
“While a slow start to any year is typical, results this quarter have given good reason for market confidence, with increased tour activity, longer lease terms coming into play, and sublease availability declining,” said Thomas Hines, Senior Vice President, Transwestern. “Continued momentum will be driven largely by interest rate movement and further clarity around return to office policies, but we are seeing positive signs from some very important indicators within the fabric of the Manhattan office market.”
Additional notable results from the report include:
- The Midtown submarket drove the bulk of the leasing activity, with five leases exceeding 100,000 square feet.
- Net absorption fell to negative 2.7 million SF, with more than two dozen blocks exceeding 50,000 square feet added to the market.
- Availability rose to 18.9%, up 0.6 percentage points from fourth quarter 2023.
- Asking rents edged up a bit from last quarter to close at $75.27 per square foot, 5.0% higher than the year-ago level.
- The “flight to quality” widened the gap between Class A and Class B space, with availability for the former decreasing year-over-year and the latter increasing.
- Although new construction remains near its lowest level in a decade, there is almost 12 million square feet of Class A office product proposed across Manhattan.
- Manhattan office sales volume remains tepid, with less than half a billion dollars sold in the first quarter.
“Solid footing for the Manhattan office market remains stubbornly hard to find,” said Corrie Slewett, Research Manager, Transwestern. “It’s not at all that the market is doing poorly, as there’s been a very nice turnaround from lowest points of the pandemic. But we have not seen the significant jump in activity that many thought the market would realize.”
Download the Q1 2024 Manhattan office report here.
About Transwestern Real Estate Services
Part of the Transwestern companies, Transwestern Real Estate Services (TRS) strives to add value for investors, owners, and occupiers across all commercial property types. Fueled by a holistic perspective of the real estate life cycle, agility and creativity are hallmarks of our approach, while vast national resources and sound market intelligence underpin customized recommendations and property solutions.
Four dynamic, integrated companies make up the Transwestern enterprise, giving us the perspective to think broadly, deeply and creatively about commercial real estate. Clients and investors rely on us for expertise that spans institutional and opportunistic investment, development, hospitality, and brokerage and asset services. Our award-winning, collaborative culture empowers team members with resources and independence to work across boundaries in pursuit of innovative solutions, reinforcing a reputation for service excellence that translates to measurable results. Through offices nationwide and alliance partners around the globe, we positively impact the built environment and our communities while fostering a work climate that champions career vitality for all. Learn more at transwestern.com and @Transwestern.
Media Contact:
Dan Foley
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dan.foley@transwestern.com
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