Manhattan office rents under pressure with 17% availability

Tightening of sublease inventory gives hope

From left: Vornado's Steven Roth with 11 Pennsylvania Plaza and 1540 Broadway (Getty, Jorge Láscar/Flickr, VNO)
From left: Vornado's Steven Roth with 11 Pennsylvania Plaza and 1540 Broadway (Getty, Jorge Láscar/Flickr, VNO)

Manhattan’s office availability rate was 17 percent at the end of June, just 0.1 percentage point less than the record-high May figure, 17.1 percent.

With many office workers still working from home, demand for available space is falling short of supply, said Franklin Wallach, Colliers’ senior managing director for New York research. Only 21.4% of Manhattan office workers were going into their offices as of June 23, according to Kastle Systems, which tracks employees’ card swipes.

Facing competition, landlords have reduced rent: Average asking rent in the second quarter was $72.79 a foot, down 8.2 percent from a year ago, and down 0.6 percent from the first quarter, according to Colliers International’s quarterly market report.

Leasing volume from April through June was 4.5 million square feet, which was up by 43 percent from the same period last year, but virtually the same as the first quarter. The second quarter volume was almost 45 percent lower than Manhattan’s five-year rolling average, 8.27 million square feet.

But during the second quarter, “signs of a gradual shift” were seen in tightening of subleasing availability, which could help the market to gain momentum in the next several months, Wallach said.

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The borough’s sublet availability shrank by 340,000 square feet during the second quarter, the first quarterly net decline in two years. The share of sublet listings represented 22.8 percent of Manhattan’s total availability, down from 24.5 percent in the first quarter, according to the report.

Sparc Group’s 155,600-square-foot deal at Vornado Realty Trust’s Penn 11 in Midtown South was the largest new lease in the second quarter, followed by Shrödinger’s 109,000-square-foot lease at 1540 Broadway in Midtown, which is also owned by Vornado.

During the second quarter, Manhattan’s office investment sales market saw more obvious signs of recovery compared with the leasing market.

Total sales during the second quarter were $1.6 billion, quadruple the record-low amount during the first quarter. The quarterly total was about the same compared with the same period last year.

The largest transaction during the quarter was SL Green Realty’s $325-milloin sale of 635-641 Sixth Avenue to San Francisco-based Spear Street Capital.