Manhattan office availability hits all-time high in Q1

Available space hit 16%, highest it’s been since 2003

345 Park Avenue and 787 Eleventh Avenue (Photos via Google Maps and Rafael Viñoly)
345 Park Avenue and 787 Eleventh Avenue (Photos via Google Maps and Rafael Viñoly)

Supply and demand for Manhattan office space continue to be misaligned in the new year — there’s too much of the former, and not enough of the latter.

Office availability in the borough hit 16.1 percent in the first quarter of 2021, the highest number on record, according to Colliers International’s latest quarterly report. That’s a jump of 5.9 percentage points compared to the same time last year, and 1.8 percentage points higher than the fourth quarter of 2020.

You’d have to go back to the second quarter of 2003 for the previous record of 13.9 percent availability.

The effect of this supply glut, according to Franklin Wallach, Colliers’ senior managing director for New York research, is “measurable downward pressure on pricing.”

The average asking rent was $73.23 per square foot, down 7.6 percent from a year ago, and down 1.6 percent from the fourth quarter of 2020. That’s the lowest it’s been since 2018.

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Leasing volume in the first quarter was 4.6 million square feet, down by 36 percent compared to the same period last year, but up 9.4 percent compared to the fourth quarter of 2020. That improvement, however, was not enough to counterbalance the supply increase: Negative net absorption was nearly 11 million square feet in the first quarter, or 365,000 square feet less than at the end of 2020.

The borough’s subtlet availability increased by 2.91 million square feet during the first quarter, bringing the total share of space available for sublease to 24.5 percent.

The biggest leases signed during the first quarter include Blackstone Group’s 720,000-square-foot renewal at Rudin’s 345 Park Avenue, and Icahn School of Medicine at Mount Sinai’s 167,348-square-foot lease at Georgetown Company’s 787 Eleventh Avenue.

Office investment sales remained “largely halted” in the first quarter, with only $400 million in total volume. That’s a decrease of nearly 90 percent compared to the first quarter of 2020, when $3.8 billion in deals was recorded, according to the report.

The biggest office investment deal was Brookfield Asset Management’s acquisition of a 25 percent stake in Tower 46 from SL Green for $275 million. The Kaufman Organization’s $35 million leasehold purchase of the Haymarket Building at 135 West 29th Street also closed in the first quarter.