Manhattan leasing activity up year-over-year while asking rents hit record high

Coming off a record-break year for the office market, Manhattan leasing volume is up 13 percent at the midpoint of 2019, according to a market report from Colliers International.

Thanks in large part to a boom in Downtown, Manhattan leasing activity – which includes both renewals and new leases – totaled 20.26 million square feet, according to Colliers. When renewals were factored out, new leases and expansions totaled 15.28 million square feet in the first half of the year, for an increase of nearly 10 percent from the same time last year.

“Similar to 2018, a healthy job market and steady economic growth has led to strong leasing activity in the first half of the year,” said David Amsterdam, Colliers Investments and Eastern Region president and U.S. Capital Markets co-head. “Overall availability remains near market equilibrium while pockets of Manhattan were at their lowest post-recession availability on record.”

The momentum in the leasing market this year builds off a record year in 2018, which saw the most leasing volume in a year since 2000.

Financial services, insurance and real estate (FIRE) tenants led the way, accounting for 38 percent of all activity, and co-working companies took nearly a third of all FIRE space. Technology, advertising, media and information services (TAMI) tenants accounted for another 28 percent.

At the same time, the first half of 2019 saw 15 percent less activity than the second half of 2018, but this was still 12.2 percent above the five year average. Asking rents continued to rise to record highs, with an average of $77.82 across Manhattan and $84.51 in Midtown.

Downtown was the submarket with the strongest growth by far, jumping 70 percent year-over-year to 5.03 million square feet. FIRE tenants had the largest share here with 34 percent, including EmblemHealth’s 440,000-square-foot renewal at the Retirement Systems of Alabama’s 55 Water Street, and WeWork’s 200,000-square-foot new lease at Jack Resnick & Sons’ 199 Water Street. Public sector tenants like Pace University and FINRA came in second with a 22 percent share.

Office leasing in Midtown South was essentially flat year-over-year with 7.02 million square feet in total volume. Bucking the trend elsewhere on the island, TAMI tenants were on top here with 54 percent of total activity, a large chunk of which came from WarnerMedia’s 1.3 million-square-foot sale-leaseback deal at Related’s 30 Hudson Yards. WeWork’s 213,000-square-foot lease at RXR Realty’s 620 Sixth Avenue contributed to FIRE tenants’ 27 percent share in this part of town.

Midtown, saw a modest year-over-year increase of 3.7 percent with 8.2 million square feet in leasing activity, half of which went to FIRE tenants. AIG’s relocation to the Rockefeller Group’s Time-Life Building at 1271 Sixth Avenue, where it will take 320,000 square feet, was the largest deal. The second-largest sector here was professional services firms with a 19 percent share, as law firms such as Akin Gump and Hunton Andrews Kurth renewed leases at 1 Bryant Park and 200 Park Avenue, respectively.