Commercial Real Estate News
Manhattan Has Best Office Leasing Quarter Since COVID Began in Early 2020
According to CBRE's Q3 2021 Manhattan market report, Manhattan office leasing activity surged compared with the second quarter of 2021, as the market registered its strongest performance since the onset of the pandemic.
Third-quarter Manhattan leasing totaled 5.88 million sq. ft., up 70% from Q2 2021. However, the Q3 total was still 5% below the five-year quarterly average of 6.16 million sq. ft.
"While still in the early stages, New York City is showing clear signs of a recovery," said Nicole LaRusso, senior director of research and analysis for CBRE New York Tri-State. "In fact, new leases and expansions improved for the third consecutive quarter. The 5.88 million sq. ft. of total leasing in Manhattan was the best quarter since Q1 2020."
For the year-to-date, Manhattan leasing has outpaced the same period in 2020 by 13%.
The financial services industry continued to drive Manhattan leasing activity through the third quarter, especially in Midtown.
Quarterly leasing activity totaled 3.31 million sq. ft. in Midtown, 13% below the five-year quarterly average of 3.79 million sq. ft. Absorption of 384,000 sq. ft. in Q3 was the first positive quarter since Q4 2019. Availability was 17.7% - a 10 basis point drop from the previous quarter. Year-to-date leasing in Midtown totaled 7.32 million sq. ft., down only 1% from the prior year.
Midtown South is well on its way to recovery with three consecutive months of leasing above the five-year monthly average. Quarterly leasing activity totaled 1.8 million sq. ft., up 47% from the five-year quarterly average of 1.23 million sq. ft., while the market's year-to-date leasing activity totaled 3.11 million sq. ft., up 141% from the same period last year. Net absorption finished Q3 at positive 465,000 sq. ft. As a result of the robust leasing, the availability rate fell 60 basis points quarter-over-quarter to 18.8%.
"The positive absorption is helping to chip away at the historically high availability rates, especially in Midtown South," added Ms. LaRusso. "We're seeing considerable sublease space withdrawals and leasing of available sublease space - both of which are eroding the glut of available space in the market."
Downtown is also experiencing positive momentum, recording 775,000 sq. ft. of leasing activity during the third quarter. This represents the third sequential quarter improvement in leasing activity, although the pace of demand recovery has been slower than in Midtown and Midtown South. Downtown's year-to-date leasing activity totaled 1.81 million sq. ft. and renewal activity totaled 847,000 sq. ft. in Q3, bringing the year-to-date total to 1.14 million sq. ft. The availability rate increased to 20.9%, up 80 basis points from the prior quarter.
