MANHATTAN OFFICE MARKET HITS RECORD HIGH AVAILABILITY IN Q1 2023

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NEW YORK CITY – The Manhattan office market reached 18.9% availability, its highest level on record, in the first quarter of 2023, with leasing activity measuring only 4.6 million square feet, the lowest quarterly tally in two years, according to research from Transwestern Real Estate Services (TRS).

Both direct and sublet availability rose to record levels. Sublet availability, which had begun to descend after being a major concern throughout 2021, rose to 5.0% of Manhattan’s total office inventory, equating to 23.1 million square feet and representing 26.5% of the available total. Some good news for the quarter came in the form of the absorption rate, which, while negative 1.2 million square feet, was a large improvement over the prior quarter’s 2.4 million square feet.

“Tenants are continuing to get a handle on the shifting landscape as they balance hybrid work plans alongside a general concern over the current economic climate,” said Thomas Hines, Senior Vice President, Transwestern. “We are seeing tenants become more active as they recognize opportunities to leverage the market and take advantage of historically high availability. The landlords who have been forward-thinking with renovations and developed a unique identity for their assets are seeing the most success in attracting occupiers.”

Additional notable results from the report include:

• There were five deals signed exceeding 100,000 square feet during the quarter, including two by Citadel in Midtown Manhattan (a 393,200-square-foot new lease and a 585,000-square-foot renewal) and a 222,900-square-foot lease by Two Sigma in Midtown South.
• Availability registered 18.5% in Class A space and 20.1% in Class B space, a divide likely to grow amid tenants’ flight to quality.
• Asking rents are $71.62 per square foot, marking a 4.3% increase compared to the first quarter of 2022, though down from $72.70 per square foot in the fourth quarter of 2022.
• Absorption has improved from a year ago and is not out of scale with quarterly levels seen prior to the COVID era.
• There is approximately 2.8 million square feet of new core office inventory under construction, well below the five-year quarterly average of 12.5 million square feet.
• Manhattan office sales volume was $441.7 million in the first quarter of 2023, a disappointing figure that reflects lowered investor confidence.

“The past two quarters have been very similar, with low leasing activity, availability on the rise and very low construction activity for new core assets,” said Corrie Slewett, Transwestern Research Manager. “These indicators seem to reflect a general unease in the broader economy as increased interest rates take effect. The market is primed for tenants who are willing to make leasing decisions in occupier-friendly conditions.”

Download the Q1 2023 Manhattan office report here.

About Transwestern Real Estate Services
Transwestern Real Estate Services (TRS) adds value for investors, owners and occupiers of all commercial property types through a comprehensive perspective and by providing solutions grounded in sound market intelligence. Part of the Transwestern companies, the firm applies a consultative approach to Agency Leasing, Asset Services, Tenant Advisory + Workplace Solutions, Capital Markets, and Research & Investment Analytics.

The privately held Transwestern companies have been delivering a higher level of personalized service and innovative real estate solutions since 1978. Through an integrated, customized approach that begins with good ideas, the firm drives value for clients across commercial real estate services, development, investment management, and opportunistic endeavors for high-net-worth investors. Operating from 33 U.S. offices, Transwestern extends its platform capabilities globally through strategic alliance partners whose unique geographic, cultural, and business expertise fuels creative solutions. Learn more at transwestern.com and @Transwestern.

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