Manhattan office availability continues to reach new highs

Both traditional office space and sublease inventory are on the rise

11 Penn Plaza (Vornado Realty Trust)
11 Penn Plaza (Vornado Realty Trust)

 

Office availability in Manhattan continues to reach new highs.

According to Colliers International’s monthly market report, the overall availability rate in November was 13.5 percent, slightly higher than the previous month’s rate and the highest number recorded since 2003.

In total, 790,000 square feet of office space was leased in November, down by nearly 80 percent compared to a year ago and down by 55 percent from October.

Manhattan’s Midtown and Midtown South submarkets set new availability records in November.

The availability rate in Midtown was 14.4 percent, up by 3.4 percentage points from a year ago and up by 0.5 percentage points from October. The rate in Midtown South was 12.8 percent, up by 4.6 percentage points from a year ago and up by 0.7 percentage points from October.

“This is higher than what it was in the Great Recession and higher than what it was in the 2001 resession,” said Franklin Wallach, Colliers’ senior managing director for New York research.

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The biggest lease of the month was a 133,600-square-foot renewal by the Travelers Indemnity Company at SL Green Realty’s 485 Lexington Avenue.

Other notable leases include Apple’s 116,500-square-foot expansion at Vornado Realty Trust’s 11 Penn Plaza, building on a lease for 220,000 square feet that the tech giant inked in February. Apple’s space now spans the 9th to 14th floors of the building.

Flex-office provider Industrious took 48,600 square feet at 44 West 37th Street, a 15-story office building developed by Ray Yadidi’s Sioni Group. According to Industrious’ website, the building will debut as Industrious Herald Square this winter. Industrious has told The Real Deal that the company’s business model is to operate offices for landlords on a management agreement, not on a traditional lease.

As tenants weather the pandemic-driven economic downturn, sublease inventory is rising nationwide, and Manhattan is no exception.

In November, Manhattan’s available sublease space rose to 17.28 million square feet, or 24.3 percent of total availability. It’s now approaching the 25 percent mark that Wallach says signals a glut.

During the Great Recession, the sublet inventory share peaked at 27 percent, and during the 2001 recession, it hit a high of 42 percent, said Wallach.

“The Manhattan market of today is a much more tenant-diverse market compared to 10 years ago, 20 years ago, with millions of square feet of new office construction, which creates a huge amount of demand,” Wallach said. “All of that continues to keep Manhattan in a strong position when the recovery finally begins.”