Manhattan Office Market Wrapped Up Tough Year

New York City. Image by Noelsch via Pixabay

The Manhattan office market closed a trying year with a difficult fourth quarter. After a swift blow in the spring, the borough struggled to regain momentum. At just 3 million square feet, leasing activity in the last three months of 2020 dropped to the lowest level since at least 2006. That amounted to a 77 percent year-over-year decrease, according to a recent Transwestern report.

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As for net absorption, the fourth quarter clocked in at a negative 6.6 million square feet for a total of -16 million square feet for the whole of 2020, the same report revealed.

Few new Manhattan leases in 4Q20

Sublets represented a significant portion of deals closed in the fourth quarter, with sublet space representing 26.5 percent of the borough’s total availability, Transwestern reported.

Out of the total seven leases over 100,000 square feet, the only two new leases were subleases, with the remaining five being renewals. Apple subleased 116,500 square feet in Penn Plaza, NYU Langone renewed its 623,900-square-foot lease in Gramercy and Centric Bands signed a 212,154-square-foot sublease at the Empire State Building.

Asking rates fell 6.8 percent year-over-year to $75.63 per square foot, with Class A office space going for $79.8 per square foot and Class B for $59.9, according to Transwestern. The drop represented the largest annual decline in the past decade. Market-wide availability climbed to 14.8 percent, the highest number since the previous recession. The SoHo submarket recorded the highest availability rate, closing 2020 at 22.0 percent, while the Insurance District and Penn Plaza saw the lowest rate, at 12.0 percent both. 

New year brings silver linings

While the New York market is still finding its footing toward recovery, the beginning of 2021 brought several significant Manhattan leases. SL Green landed Beam Suntory, which is moving its global headquarters from Chicago by mid-2022, at 11 Madison Ave. The producer of distilled beverages signed a 15-year agreement for nearly 100,000 square feet. In addition, Japanese conglomerate HNA Group secured two renewals and a new commitment of an existing subtenant totaling 224,408 square feet at 245 Park Ave.

Meanwhile, Belkin Burden Goldman LLP and Dime Community Bank inked Midtown leases for a total of 50,000 square feet, while meal delivery company Freshly quadrupled its footprint in the borough to 92,000 square feet.