Transwestern’s Third-Quarter Report Outlines Positive Notes Amid Slump
October 19, 2020
New York City – Manhattan’s office market posted four leases topping 100,000 square feet during the third quarter, including 2020’s largest lease by far: Facebook’s 730,000-square-foot deal at the soon-to-be-completed Farley Building in Midtown. Otherwise, it was a difficult quarter. Leasing activity fell dramatically, rents began a downward trend and availability widened across all submarkets in the city.
Manhattan leasing fell to a new low during the quarter with less than 3.8 million square feet of transactions, a decline of 55% year over year. Year-to-date leasing suffered similarly, with its total of 15.6 million square feet representing a 43.5% decline from the same period in 2019.
In addition to the four new leases topping 100,000 square feet, there were eight renewals of at least 50,000 square feet in size. However, even with these leases, demand was still down across the city, with 6.1 million square feet of negative demand, the lowest level in more than a decade. Each of the 15 submarkets tracked by Transwestern recorded negative absorption during the quarter, reflecting the uncertainty generated by the pandemic on the commercial real estate industry. Manhattan’s overall availability rate rose by 1.7 percentage points to 13.6%, due to the addition of 49 blocks of space exceeding 50,000 square feet each.
Average asking rents continued a drop that began last quarter, declining 3.2% in third quarter to $78.33 per square foot. This marks the end of a five-quarter streak of rents above the $80-per-square-foot mark. However, rents in Manhattan overall and each major submarket are still fairly high, remaining within 5% of the peaks in late 2019 and early 2020.
Sales transaction volume fell under the $1 billion mark for the first time in a decade. Office sales totaled $992.5 million during the quarter, a 68.1% drop compared to the same period in 2019.
“Anyone watching the office market was prepared for a down quarter,” said Corrie Slewett, Research Manager at Transwestern. “We are likely to see further weakening in the market to close 2020, though perhaps not as drastic as the third quarter. We anticipate that there may be some stabilization of the market as tenants and owners get more acclimated to the changing landscape and adapt to each month’s ‘now normal.’”
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. An integrated approach formed from fresh ideas drives value for clients across commercial real estate services, development, investment management and opportunistic programs for high-net-worth investors. The firm operates through 34 U.S. offices and global alliances with BNP Paribas Real Estate and Devencore. Learn more at transwestern.com and @Transwestern.