Manhattan office leasing holds steady as mid-year approaches

Leasing volume through May was just 5% off from last year, absorption is looking better
By Rich Bockmann | June 09, 2017 04:20PM

Jamie Dimon and rendering of 5 Manhattan West (Credit: Getty Images and REX Architecture)

Heading into the halfway point of the year, leasing activity in Manhattan’s office market is on par with where it was in mid-2016, and with less new supply coming online, the absorption picture is looking better.

Leasing activity in May was down 21 percent year-over-year at 2.3 million square feet, according to Colliers International. This, despite the fact that Manhattan’s largest new lease of 2017 – BlackRock’s 847,000-square-foot deal at 50 Hudson Yards – closed during the month.

Other big deals in May include the city’s Human Resources Administration taking 200,000 square feet at 375 Pearl Street  and Business Insider signing for 88,000 square feet at 1 Liberty Plaza, both in Lower Manhattan.

But velocity so far this year has been strong, thanks to big deals earlier on like 21st Century Fox and NewsCorp.’s 1.2 million-square-foot renewal and expansion in Midtown in January and the Royal Bank of Canada’s 402,000-square-foot renewal Downtown in February.

In the year’s first five months, total leasing activity stood at 14.6 million square feet, just a little over 5 percent shy of where it was last year, Colliers’ data show.

“Year-over-year, the market has been relatively stable, although demand has weakened a bit,” said Colliers’ Craig Caggiano, who pointed out that June is already off to a strong start with JPMorgan finalizing a 305,000-square-foot lease at Brookfield Property Partners’ 5 Manhattan West.

“Keep in mind, in just the first full week of June, already there has been at least one significant deal,” he said. “Of course, we’ll see what happens in the next three weeks of the month.”

By the midway point of last year, leasing activity stood at 17.8 million square feet, putting 2017 activity 3.2 million square feet shy of that mark at the start of June. So far this year, Manhattan’s been averaging about 3 million square feet of deals a month, and is on track to beat the market’s 10-year average.

“Adding in the reported 305,000 square foot lease at 5 Manhattan West by JPMorgan Chase, we can expect total leasing volume during the first half of 2017 to surpass the historical average,” Colliers’ Frank Wallach said.

All in all, deal volume in the office leasing market is holding steady, a telling sign as segments such as the investment sales, hotel and retail markets show significant signs of adversity.

Another figure that should, at least for the time being, give the market a relative boost of confidence: Net absorption through the first five months of 2017 stood at 1.02 million square feet, a third of what it was the same time last year.

In the near term, however, the Manhattan market will still see a significant amount of new supply come online, and by the end of June, the market could record its first span of four-straight quarters of negative absorption since 2008 and 2009.

(To view 2017’s office leasing transactions so far, click here)