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Manhattan Office Market Finally Enjoys Positive Absorption in 2018

According to CBRE’s latest Manhattan Office MarketViews Report for the third quarter of 2018, office leasing activity totaled 6.73 million sq. ft. in Q3 2018, 3% behind its five-year quarterly average, while year-to-date leasing activity totaled 22.09 million sq. ft., 5% higher than the same period last year. The availability rate during Q3 was 11.7%, down 10 basis points (bps) from Q2 2018 and unchanged from a year ago.

“One of the big stories from the third quarter was the continuing leasing momentum among flexible space providers, who were a major driver of activity last quarter. In Midtown South, one single flexible space provider accounted for four out of the five largest deals during the quarter,” said Nicole LaRusso, Director of Research & Analysis for CBRE Tri-State. “In Midtown, leasing activity exceeded four million square feet for the sixth consecutive quarter. This puts Midtown’s year-to-date leasing at its highest level since 2006.”

In Manhattan, quarterly net absorption registered 347,000 sq. ft., bringing the year-to-date total to negative 2.01 million sq. ft. The average asking rent, at $72.47 per sq. ft., was virtually unchanged quarter-over-quarter, but is down 2% from a year ago.

The Midtown market saw 4.38 million sq. ft. of leasing activity during Q3 2018. With 13.88 million sq. ft. of year-to-date leasing activity, Midtown is 6% ahead of the same time last year. This strong leasing activity drove quarterly net absorption into positive figures for the first time since Q4 2017.

Strong leasing activity also resulted in a drop in the availability rate, which is down to 11.1%, 100 bps less than Q3 2017. Average asking rents in Midtown increased to $78.41 per sq. ft., a 2% jump quarter-over-quarter. Tenants in financial services accounted for 36% of year-to-date leasing activity in Midtown, followed by law firms/legal services at 14%.

In Midtown South, leasing activity totaled 1.62 million sq. ft. in Q3 2018, a 14% decrease from Q2 2018, but 20% above the five-year quarterly average. At 4.78 mil, the pace of leasing year-to-date is the second-best performance this cycle, trailing only 2014’s year-to-date total of 5.16 million sq. ft. Smaller-sized deals drove Midtown South leasing activity during Q3 2018, as transactions 50,000 sq. ft. and below accounted for 72% of total activity during the quarter.

The availability rate in Midtown South increased to 10.8% during the third quarter, up 10 bps from Q2 2018 and flat from a year ago. Net absorption registered a negative 27,000 sq. ft. in Q3, bringing the year-to-date absorption to negative 744,000 sq. ft. The submarket’s average asking rent fell 2% from the previous quarter, dropping to $77.15 per sq. ft., but remains up 7% year-over-year.

Following a strong Q2 2018, leasing activity in the Downtown market cooled in the third quarter, dropping by 62% quarter-over-quarter to 726,000 sq. ft. Demand was largely driven by activity in the technology, advertising, media and information (TAMI) sector, which accounted for 38% of quarterly leasing activity. In Q3 2018, flexible space providers expanded their already noticeable footprint Downtown–contributing to 25% of leasing activity.

The availability rate Downtown rose 10 bps from Q2 2018, ending the quarter at 14.3%. Quarterly net absorption registered negative 93,000 sq. ft., bringing year-to-date absorption to negative 722,000 sq. ft. Average asking rents, at $60.66 per sq. ft., decreased 1% since Q2 2018 and are down 2% from a year ago.

Source From: http://www.worldpropertyjournal.com

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