NEW YORK CITY – For the second consecutive quarter, the Manhattan office market posted a record high availability rate, closing the second quarter of 2023 at 19%, up from 18.9% last quarter. However, the quarter was not without some positives, as leasing activity and average rents were up over the last quarter, according to research from Transwestern Real Estate Services (TRS).
The record availability was spurred on by the addition to the market of approximately 30 large blocks of space exceeding 50,000 square feet each. As most of those blocks were for direct space, the sublet availability declined during the quarter. The largest lease of the quarter was a 640,000-square-foot deal for the NYC Department of Citywide Administration Services at 110 William St. in the Downtown submarket, while an additional four lease renewals topped 100,000 square feet.
“As it relates to rent growth, we continue to see new construction and high-end, Class A assets push rents in each of the major submarkets,“ said Rory Murphy, Partner at Transwestern. “The separation between Class A and everything else remains a big story in the market. Leasing activity continues to be driven by tenants looking to improve their amenity and space offerings as employees return to the office.”
Additional notable results from the report include:
- Leasing activity measured 5.8 million square feet in the second quarter, which is up from last quarter.
- Sublet availability, which has been a concern since the start of Covid, edged down a bit to 4.8%, for a total of more than 22 million square feet of available sublet space.
- Absorption was negative 819,000 square feet and negative 2 million square feet year-to-date.
- While still in the negative, the absorption rate was a marked improvement over the preceding two quarters, of 1.2 million square feet and 2.4 million square feet, respectively.
- Average asking rents bumped up 3% since last quarter to $73.77 per square foot, the highest figure since late 2020, with increases in both Class A and Class B space.
- The asking rents have recorded five straight quarters of year-over-year growth, improving 2.4% from the second quarter of 2022.
- Manhattan office sales volume increased to $1.6 billion, far exceeding last quarter’s disappointing $441.7 million figure. However, the current four-quarter rolling volume of $6.1 billion is dwarfed by the average four-quarter rolling sales volume in the five years prior to the pandemic of approximately $20 billion.
“There is definitely a continued level of uncertainty brewing in the market, and it’s particularly evident in the record high availability figures and the fairly empty construction pipeline, with the lowest amount of office construction in at least a decade,” said Corrie Slewett, Research Manager at Transwestern. “The average asking rents provide a dose of good news, though. While they have been up and down over the past few quarters, we’re on a five-quarter streak of year-over-year quarterly growth.”
Download the Q2 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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