The Real Deal New York

Absorption levels out as Manhattan’s office market sees strong start to 2017

By Rich Bockmann | April 18, 2017 02:40PM

UPDATED, April 18, 5:06 p.m.: Manhattan’s office market saw a strong first quarter to 2017 with more than 9 million square feet of leasing activity. And absorption leveled off in the first three months following a year in which new supply outstripped demand for the first time since 2009.

On the back of large renewals like News Corp./21st Century Fox’s 1.2 million-square-foot deal at 1211 Sixth Avenue and the Royal Bank of Canada’s 400,000-square-foot lease at Brookfield Place, Manhattan registered 9.2 million square feet worth of activity in the first quarter of 2017, according to Colliers International. That was down 4.6 percent from the 9.6 million square feet leased during the first three months of 2016.

Both quarters represented strong starts to their respective years compared to the 10-year benchmark average, but by the end of 2016 absorption had turned negative to minus 3.79 million square feet as leasing activity failed to keep pace with new inventory coming online at places such as the World Trade Center and Hudson Yards.

A year ago, absorption was at negative 1.8 million square feet, and during the last three months of 2016 it was negative 1.7 million square feet.

Through the first quarter of this year, it leveled off to slightly less than negative 128,000 square feet, according to Colliers.

“Despite positive absorption in Midtown and Downtown, negative absorption of 880,000 square feet in Midtown South resulted in relatively flat absorption for the quarter in Manhattan,” said Franklin Wallach, managing director of research for Colliers’ tri-state region.

Manhattan’s average asking rent grew about 2 percent year-over-year to $73.92 per square foot. Overall, Manhattan’s office market showed a healthy start at a time when other segments of New York City real estate are slipping.

The investment-sales market, for example, was off by more than 50 percent during the first half of the year compared to the same time in 2016, which itself was down from the previous year.

“The market is full of speculation as to when this current cycle will end,” Colliers executive director Craig Caggiano said. “First quarter numbers showed a continuation of a healthy market.”

Correction: A previous version of this story incorrectly listed the address of News Corp./21st Century Fox as 1221 Sixth Avenue. It is 1211 Sixth Avenue.

(To see our Manhattan office leasing Deal Sheet, click here)