Manhattan office leasing down 11% this year

Midtown asking rents up 3 percent since the turn of the year, according to Cushman

Manhattan Office Asking Rents
Manhattan office asking rents by submarket (credit: Cushman & Wakefield)

The Manhattan office market remained steady with 2.3 million square feet of leases signed in April – though year-to-date leasing figures of nearly 9 million square feet represent a nearly 11 percent drop from the first four months of last year, according to Cushman & Wakefield.

April leasing figures were slightly above average for the year-to-date and represented the highest monthly total since November, when 2.8 million square feet of Manhattan office leases were signed.

The largest deal signed in April was NYU Langone Medical Center’s 390,000-square-foot lease for the entirety of Columbia Property Trust’s 220 East 41st Street in Midtown East.

Overall Manhattan asking rents of $72.48 per square foot through April were up nearly 4 percent year-on-year and only 49 cents lower than the pre-recession peak in September 2008, according to Cushman.

In Midtown, asking rents have accelerated recently and are up nearly 3 percent since the turn of the year alone, to $78.79 per square foot, the brokerage said. Midtown South asking rents have climbed more than 7 percent from April 2015, to $68.19 per square foot, while Downtown asking rents are up 2 percent year-on-year, to $58.86 per square foot.

But Manhattan office leasing remained down overall through the first third of the year, with “a big portion of that decrease” attributed to a “lack of megadeals,” according to Cushman regional research director Richard Persichetti.

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There have been only nine Manhattan office leases greater than 100,000 square feet signed through the first four months of this year, compared to 21 such deals at this point last year, Persichetti told The Real Deal.

“Although you might say demand is down, a lot of that is attributed to the large deals,” he said. “Clearlye we’re not on pace for the same amount of large deals that we had last year.”

But Persichetti said he expects the lack of large deals to “balance out over the next eight months,” with economic forecasts indicating “strong employment gains, specifically in office-using employment,” for the city’s economy and “more large tenants in the market looking for space then there were a year ago.”

Midtown office leasing totaled 1.5 million square feet in April; while representing the strongest month seen in 2016, Midtown leasing this year-to-date is down 21 percent year-on-year but still “above the historical average,” Cushman said.

Midtown South leasing totaled more than 580,000 square feet in April, buoyed by Credit Suisse’s 186,000-square-foot renewal at 11 Madison Avenue. With 1.9 million square feet of leases signed in the year-to-date, the Midtown South market is outpacing last year’s performance by more than 24 percent, according to the brokerage.

There were nearly 196,000 square feet of leases signed in the Downtown market in April, with 1.2 million square feet of deals total in the first four months of 2016 representing a 3.4 percent jump year-on-year.

The overall vacancy rate in Manhattan jumped only 0.1 percent in April from the previous month, to 9.1 percent. Midtown’s vacancy rate inched up to 9.4 percent for the month, while Midtown South vacancy dropped slightly to 6.1 percent and Downtown vacancy ticked up to 10.5 percent, according to Cushman.