Demand for Manhattan office space was so robust in May that it pushed 2018’s leasing total ahead of where it was at this point last year.
Thanks to deals like J. Crew’s 358,000-square-foot sublease at Brookfield Place and Facebook’s 319,000-square-foot expansion at 770 Broadway, Manhattan recorded 4.17 million square feet worth of new leases and renewals last month, according to Colliers International.
That was a jump of nearly 83 percent over the 2.28 million square feet leased in May 2017.
The burst of activity marks a significant milestone for the year, which had been shaping up to be relatively slow compared to a banner 2017. Leasing activity last year was the second-highest it had been in more a decade, and many wondered if that kind of momentum could be repeated in 2018.
After a slow start to the year, leasing began picking in April, and last month’s figures helped close the gap and put 2018 on track to potentially set a new high-water mark.
“Manhattan leasing is outpacing 2017, year-to-date,” said Craig Caggiano, executive director for Colliers’ tri-state region. “Bear in mind, however, very strong leasing activity during the second half of last year helped to propel 2017 to the second most-active year since 2003.”
On the year, Manhattan leasing activity stood at 15.27 million square feet through the first five months of 2018, a 4.4 percent increase over the 14.62 million square feet leased during the same time last year.
And Colliers’ May figures don’t include the 1.1 million-square-foot lease Deutsche Bank executives announced last month to move the bank’s headquarters from Wall Street to the Related Companies’ Time Warner Center.
That would be on par with last year’s biggest deal – 21st Century Fox and News Corp.’s 1.2 million-square-foot expansion/renewal on Sixth Avenue – and will surely provide a significant boost to 2018’s annual total if it closes this year.
Manhattan absorption – or the ability for leasing activity to keep up with new inventory added to the market – turned positive last for the first time since September, according to Colliers. Absorption in May stood at slightly more than 800,000 square feet.
Franklin Wallach, managing director of the research group at Colliers, said one of the big questions now is whether leasing activity will stay strong enough to absorb some 7 million square feet worth of space scheduled to hit the market next year.
“Leasing activity will have to continue at a healthy pace since there are large blocks of space we anticipate will be added to the available supply during the second and third quarters of 2019,” he said.
The availability rate ticked down slightly to 10.2 percent, which is basically an equilibrium between a market that favors landlords and one where tenants have more negotiating power.
And the addition of above-average priced space in Midtown, along with less expensive space removed from the markets in Midtown and Midtown South, helped push up Manhattan’s average asking rent. The average asking rent increased nearly 1 percent to $74.04.
Other large deals last month included McKinsey & Company’s 184,000-square-foot lease at Larry Silverstein’s 3 World Trade Center and Touro College’s 146,000-square-foot lease at 320 West 31st Street.
Law firm Blank Rome’s 138,000-square-foot deal at 1271 Sixth Avenue rounded out the month’s top five deals.