Manhattan office demand just couldn’t keep up with new supply in 2016

Absorption falls for first time since '09

TRD New York /
Jan.January 04, 2017 08:30 AM

(Credit: David Brin)

Tenants gobbled up more than 33 million square feet of Manhattan office space in 2016, pushing leasing activity up 5.5 percent year-over-year, according to a new report from Colliers International. But even as large chunks of new supply came online, many big tenants chose to renew their leases and stay put, resulting in the market seeing negative absorption for the first time since 2009.

Demand was strong last year, with WeWork TRData LogoTINY on a tear signing roughly 800,000 square feet of new leases and expansions and Swiss bank UBS renewing 900,000 square feet at RXR Realty’s 1285 Sixth Avenue, Colliers data show.

In fact, the 33.1 million square feet leased in 2016 was the third-highest total in the past 10 years, behind 37.38 million square feet in 2014 and the 33.92 million square feet leased in 2013.

But the four largest deals of 2016 were either renewals or sale-leasebacks. And even as tenants signed leases for new spaces in new buildings on the Far West Side and in Lower Manhattan, demand wasn’t able to keep pace with the available supply.

Net absorption for the year was negative 3.79 million square feet, according to Colliers. That was the first full year of negative absorption since 2009, when the figure dropped to negative 10.07 million square feet in the depths of the Great Recession.

The weak performance back then was driven by anemic demand and high sublet space. Now, the market’s fundamentals are far more robust, but Joseph Harbert, Colliers president for the Eastern Region, said that in 2017 there “will be significant pockets of opportunity for value-conscious tenants in the Manhattan market.”

The average asking rent in Manhattan was $73.24 per square foot at the end of 2016, up from $71.50 a foot the previous year.

Related Articles

Today’s Northern NJ office sales volume is double 2018’s

Today’s Northern NJ office sales volume is double 2018’s

Clockwise from left: 1 New York Plaza, Hudson Yards, 341 Ninth Avenue and 55 Water Street (Credit: Google Maps, Wikipedia Commons, Getty Images)

These were NYC’s top office leases in November

23-10 Queens Plaza South, Gary Segal and Justin Ehrlich (Credit: Google Maps)

Dynamic Star CEO buys Queens Plaza site for $28M

From left: 295 Fifth Avenue, 3 World Trade Center, 50 Rockefeller Plaza (Credit: Google Maps, Wikipedia)

These were NYC’s top office leases in October

620 Sixth Avenue and RXR Realty's Scott Rechler (Credit: Getty Images, RXR Realty)

RXR gets $400M+ from Goldman Sachs to refi Sixth Avenue building

550 Madison (Credit: Gensler)

Renderings revealed for 550 Madison’s renovated lobby

50 Rockefeller Plaza and Katten's Chris DiAngelo (Credit: Google and Katten)

Katten law firm moving to Rockefeller Center

An aerial view One World Trade Center in Lower Manhattan (Credit: iStock)

On anniversary of 9/11, the World Trade Center office market is now helping propel Downtown