Commercial Real Estate News
As People Return to Work, Manhattan Office Market Enjoys Quarterly Uptick in Demand
According to CBRE's latest MarketView report for Manhattan's Midtown, Downtown and Midtown South markets, quarterly office leasing activity in Q2, 2021 totaled 3.47 million sq. ft., 44% below the five-year quarterly average of 6.14 million sq. ft, but a 20% improvement from the prior quarter.
"In New York City, where more than 60% of the population has received at least one dose of a vaccine, life is rapidly returning to normal and the market is showing signs of optimism as we see occupier demand growing," said Nicole LaRusso, senior director of research and analysis for CBRE Tri-State. "While asking rents are down year-over-year, the outlook is getting brighter for the market overall as businesses are operating at full capacity and NYC's transit usage, dining reservations and office occupancy measures continue to climb to reach their highest points since before the pandemic."
Year-to-date leasing activity in Manhattan totaled 6.35 million sq. ft., down 23% from the same period last year. Renewals totaled 799,000 sq. ft. in Q2, bringing the year-to-date total to 2.16 million sq. ft. The availability rate rose 140 basis points (bps) to 18.6% quarter-over-quarter and was up 650 bps year-over-year. Net absorption was negative 6.02 million sq. ft. in Q2, bringing the year-to-date total to negative 15.12 million sq. ft. At $75.67 per sq. ft., the average asking rent was essentially flat quarter-over-quarter but was down 7% year-over-year. Sublease availability was 4.8%, with average asking rents down 10% from a year ago, to $57.97 per sq. ft.
Midtown experienced an uptick in leasing activity and a slowdown in sublease additions during the quarter, indicating improving occupier sentiment. Midtown leasing activity was 2.09 million sq. ft., up 9% from Q1 2021, but still 45% below the five-year quarterly average. Renewals totaled 430,000 sq. ft. in Q2, bringing the year-to-date total to 1.62 million sq. ft. and net absorption to negative 2.73 million sq. ft. in Q2 2021, bringing the year-to-date total to negative 7.25 million sq. ft. The availability rate increased 90 bps quarter-over-quarter to 17.8%, the highest level since 1990, but at $81.37 per sq. ft., Midtown average asking rent remained essentially flat quarter-over-quarter, though down 7% from the prior year. Sublease availability was 4.3%, with average asking rents down 9% from a year ago, to $60.67 per sq. ft.
In the Downtown market, leasing activity totaled 591,000 sq. ft. during Q2, up 32% from Q1 2021 but 49% behind the five-year quarterly average. The submarket recorded 162,000 sq. ft. of renewals in Q2, up 108% from the 78,000 sq. ft. one quarter ago. The availability rate increased to 20.1%, up 150 bps from the previous quarter and 720 bps from the prior year mainly due to large block additions in the Downtown submarket. Quarterly absorption was negative 1.30 million sq. ft. during Q2 2021. Average asking rent declined 1% from the previous quarter to $58.23 per sq. ft. and was down 8% from one year ago. Sublease space increased 81% year-over-year to 5.17 million sq. ft. at the end of Q2 2020, accounting for 28% of all available space.
Midtown South saw quarterly leasing total 788,000 sq. ft., 52% better than in Q1 2021 but still 33% below the five-year quarterly average of 1.17 million sq. ft. Year-to-date leasing activity in Midtown South totaled 1.31 million sq. ft., up 11% from the same period last year and renewals totaled 149,000 sq. ft. in Q2, bringing the year-to-date total to 246,000 sq. ft. The availability rate rose 240 bps to 19.4% quarter-over-quarter and was up 880 bps year-over-year. Net absorption was negative 1.95 million sq. ft. in Q2, bringing the year-to-date total to negative 3.33 million sq. ft. At $79.06 per sq. ft., the average asking rent was up 2% quarter-over-quarter but was down 8% year-over-year. Sublease availability was 5.2%, with average asking rents down 13% from a year ago, to $59.91 per sq. ft.
