Manhattan’s office market continues to slump.
In the third quarter, deals were inked for 4.81 million square feet of office space, just half of what was leased during the same time last year.
That brought the year’s total to 14.81 million square feet, also down 50 percent from the same period in 2019, according to Colliers International’s quarterly market report. If the pace of leasing continues for the rest of the year, leasing volume in 2020 would be the lowest this century, according to the report.
“Leasing volumes during the recession don’t usually drop off 50 percent,” said Franklin Wallach, Colliers’ senior managing director for New York research.
To put the decline into perspective, after the dot-com bubble burst, leasing activity dropped by 14 percent between 2000 and 2001. During the Great Recession, from 2007 and 2008, it fell by 18 percent, Wallach said.
The slow year has left a lot of space unfilled. Manhattan’s office availability during the third quarter was 12.3 percent, the highest since the second quarter of 2013. Sublet space represented 23.2 percent of the total availability, the highest percentage share since 2009.
Those increases have put downward pressure on pricing, which was until recently considered stable. The average asking rent for the third quarter was $77.12 per square foot, down 2.8 percent from the previous quarter.
Office purchases in Manhattan have also slowed. There were 37 sales in the third quarter, down from 55 in the second, and the total value of sales decreased to $1.6 billion from $2.1 billion.
Still, there was a slight rebound in leasing volume from the second quarter of 2020. It was up by 1.6 million square feet, powered by Facebook’s 730,000-square-foot lease at Vornado’s Farley Post Office redevelopment and American International Group’s 217,638-square-foot deal at 28 Liberty Street.
While the pandemic is the primary culprit for the market’s softening, the election is also a factor, said Andrew Jacobs, Colliers’s managing director for capital markets.
“That uncertainty could potentially lead to another soft quarter in terms of transaction volume,” he said.