Commercial Real Estate News
Manhattan Office Leasing Activity Dips in Early 2018
According to CBRE's newly released Manhattan Office MarketView for the first quarter of 2018, the report shows that leasing activity totaled 6.39 million sq. ft. in Q1 2018, 6% below its five-year quarterly average. The availability rate was 11.8%, up 30 basis points (bps) from Q4 2017, and 20 bps from a year ago.
"The first quarter saw a slowdown in the volume of large new lease transactions that fueled the market last year, especially in the Downtown market," said Nicole LaRusso, Director of Research and Analysis, CBRE Tri-State. "We see a solid pipeline ahead and believe that the second quarter will pick up a bit from here."
In Manhattan, quarterly net absorption registered negative 2.20 million sq. ft. The average asking rent, at $73.03 per sq. ft., was virtually unchanged quarter-over-quarter, but declined 1% from a year ago. Sublease availability currently stands at 2.5%, up 20 bps from Q4 2017, and 30 bps year-over-year.
"Providers of coworking and other flexible office solutions continued to be a big force across Manhattan in Q1 2018," LaRusso added. "These tenants completed 19 transactions and took over 900,000 sq. ft. of space in just three months, including seven deals by Knotel and five by WeWork."
In the Midtown market, Q1 2018 saw 4.33 million sq. ft. of leasing activity, a strong start to the year. The first quarter was also notable because tenants reasserted the attractiveness of core Midtown submarkets. Grand Central was very active last quarter, with 1.12 million sq. ft. of leasing activity that accounted for 26% of Midtown leasing year-to-date. Greenberg Traurig signed one of the largest deals last quarter at One Vanderbilt, where it leased 130,000 sq. ft. Park Avenue also scored a big win, with a large expansion and renewal at 277 Park Ave.
The majority of Midtown's leasing activity was concentrated in 50,000 sq. ft. and below size segment, which accounted for 65% of leasing activity. Despite the strong leasing totals, the addition of several large block availabilities drove quarterly net absorption to negative 780,000 sq. ft. The availability rate remained at 11.2% quarter-over-quarter, but dropped 70 bps from this time last year. Financial services accounted for 42% of year-to-date leasing activity, followed by coworking/flexible office solutions at 18%.
In Midtown South, leasing activity totaled 1.27 million sq. ft. in Q1 2018, a 16% drop from the previous quarter, and 1% below the five-year quarterly average. At 11%, the availability rate increased 100 bps from Q4 2017 and was up 10 bps year-over-year. Net absorption registered a negative 952,000 sq. ft. in Q1 2018, the market's second largest quarterly instance of negative absorption since early 2013. The average asking rent rose to an all-time peak of $77.20 per sq. ft., up 6% from the previous quarter, and 4% from one year ago. Sublease availability increased 80 bps from a quarter ago to 3.3%, with an average asking rent of $69.80 per sq. ft.
In the Downtown market, first-quarter leasing activity totaled 794,000 sq. ft., a decrease of 19% from Q4 2017 and 37% below its five-year quarterly average. Flexible office solution providers (coworking/shared space) continued to be active within the market, accounting for 18% of quarterly leasing activity. The availability rate rose 50 bps from Q4 2017, and 270 bps from a year ago, ending the quarter at 14.0%. Quarterly net absorption registered negative 467,000 sq. ft., as space additions to the market outpaced tepid leasing activity. Asking rents continued their gradual increase, growing 1% since Q4 2017 and 20% since the end of 2014.
