Manhattan office leasing off to strong start in 2017

Led by deals on Sixth Avenue, January activity jumped 70% year-over-year

Office buildings along Sixth Avenue in Midtown (credit: Google Maps)
Office buildings along Sixth Avenue in Midtown (credit: Google Maps)

Manhattan’s office-leasing market started with a bang in 2017 as tenants and landlords inked 4.5 million square feet of deals in January, an increase of slightly more than 70 percent from the same time a year earlier.

Sixth Avenue, which has slumped in recent years as large tenants have relocated to Hudson Yards and other parts of the city, saw four of the top five deals in January.

Leasing activity was led by the combined 1.2 million square feet of renewal and expansion at Callahan Capital Properties and Ivanhoe Cambridge’s [TRDataCustom] 1211 Sixth Avenue by 21st Century Fox and News Corp, which decided to stay put on Sixth after backing out of a deal a year earlier to anchor Silverstein Properties’ 2 World Trade Center.

Even if those large deals were removed from consideration, activity in January would still be more than 16 percent above the 2.65 million square feet worth of transactions closed in January of last year, according to Colliers International.

Sixth Avenue also saw Endurance Specialty Holdings take 143,000 square feet at Rockefeller Group’s 1221 Avenue of the Americas and the New York Times Company signing a short-term sublease with Time Inc. for about 160,000 square feet at Rockefeller’s 1271 Avenue of the Americas.

“Every couple of months you hear concerns about demand for space on Sixth Avenue in Midtown, but then several deals close and the those fears are set aside for a time,” said Craig Caggiano, executive director with Colliers, “January was a good month for Sixth Avenue, with four out of the five largest deals in Manhattan.”

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“We are always hesitant to draw too many conclusions off of one month of data, but January was a good month for the market, overall,” he added.

Manhattan ended 2016 with more than 33 million square feet of leasing activity – a 5.5 percent increase over 2015 – but absorption turned negative for the first time since 2009 as activity failed to keep up with additional new supply.

Manhattan absorption in the first month of 2017 was positive at 440,000 square feet, though Caggiano said it was too early to tell whether that will lead to positive absorption for the quarter. The market’s average asking rent climbed from $71.41 per square foot in January 2016 to $73.43 per square foot.

In the Downtown market, the New York State Attorney General’s 342,000-square-foot lease at Fosun Group’s 28 Liberty was the largest new deal – excluding renewals – that the market’s seen since late 2014, when Hudson’s Bay Company signed for 399,000 square feet at Brookfield Place in September.

The Lower Manhattan market also saw another milestone in January. Average asking rents rose above $60 per square foot for the first time, led by above-average-pricing for space at 3 World Trade Center and 101 Franklin Street.

“There is no question that above-market pricing at 3 World Trade Center and 101 Franklin helped Downtown break through the $60-per-square-foot average asking rent threshold for the first time on record,” explained Franklin Wallach, senior director for Colliers research in New York. “Pricing at these two buildings will likely continue to exert an upward pressure on asking rents Downtown through to the end of the quarter.”