New commercial leasing plummeted during the second quarter of this year, one of several signs that the city should brace for an increasingly sluggish economy.
Leasing activity dropped 15.6 percent from the same time last year, with only 7 million square feet rented, according to the city Comptroller’s latest economic update report. This is the second consecutive decrease in leasing activity, following the first quarter’s 6 percent year-over-year drop. This quarter, most leasing activity occurred in Midtown with 4.4 million square feet where median rent was $79.18 per square foot, followed by Midtown South with 1.5 million square feet where rent averaged $76.45 per square foot, according to data compiled by Cushman & Wakefield .
The decrease accompanies the slowest growth rate in real gross city product (GCP) seen since the fourth quarter of 2013, according to the report. The GCP grew at an annual estimated rate of 1.7 percent in the second quarter of 2016. Job growth also slowed substantially, with an annualized payroll job growth of only 1.4 percent, compared to the first quarter’s 4.1 percent. The job force shrunk by 34,200 people, the biggest drop on record, according to the report.
The city also lost out on venture capital investment this quarter. Investment in the New York Metro area fell year-over-year by 40.3 percent to $1.4 billion. Meanwhile, venture capital investment grew to $2.1 billion in Los Angeles/Orange County, the report states.
Still, the report points to the residential market as a source of some strength in New York City’s economy. A Douglas Elliman report found that the average sales price of homes in Manhattan increased by 13.1 percent to $2 million.