Manhattan office leasing has best month since pandemic hit

Midtown leads way in July, hitting 3-year high: Colliers

Steven Roth, Aby Rosen, and Albert Behler (Illustration by The Real Deal with Getty Images)
Steven Roth, Aby Rosen, and Albert Behler (Illustration by The Real Deal with Getty Images)

Midtown is having a moment.

Available office space in Manhattan’s central business district dwindled for the fifth straight month, an encouraging sign for landlords after a painful period of surplus, according to a Colliers’ report of July leasing activity.

That helped Manhattan as a whole fill more office space than in any month since January 2020.

“Midtown’s ability to attract tenants is notable,” said Franklin Wallach, director of research at Colliers. “It really had its back against the wall early in the pandemic.”

Nearly 2 million square feet of office space was leased in Midtown in July, a three-fold jump from July 2021 and more than in any month since December 2018, the report found.

Among the deals that moved the needle: Software maker Datadog and jobs lister Indeed expanded, taking 330,000 square feet at 620 Eighth Avenue and 247,000 square feet at 1120 Avenue of the Americas, respectively. Katz Media Group renewed its lease of 227,000 square feet at 125 West 55th Street.

However, some 16 percent of office space remains available in Midtown — a percentage point less than in Manhattan overall — and Downtown has more availability than it did after the Great Recession and after the 2001 recession.

Wallach put 10 percent availability as the equilibrium point for landlords and tenants, meaning the market remains in the favor of companies looking to lease.

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But if leasing continues at this pace for the remainder of the year, the market could get to within earshot of pre-pandemic leasing volume, which averaged 33 million square feet annually from 2010 to 2019.

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Notable leasing in July in Midtown South included Capital One’s expansion to 117,000 square feet at 114 Fifth Avenue and Vista Equity Partners’ new lease for a 95,000 square feet at 50 Hudson Yards. Downtown, Jane Street Capital expanded to 156,000 square feet at 250 Vesey Street and fintech’s Fiserv grew to 76,000 square feet at 1 Broadway.

To achieve the kinds of positive absorption that make landlords sing, future demand will need to overcome space coming to market at Vornado’s Penn 2 Plaza, Harbor Group’s Black Rock building, RFR’s 522 Fifth Avenue and Paramount Group’s 31 West 52nd Street.

To be sure, it’s been a brutal two years for commercial building owners.

Office space leased in Manhattan fell by 50 percent in the first year of the pandemic, remained down 40 percent in 2021 and this year might end up at just 25 to 30 percent of pre-pandemic levels, according to Wallach. Factor in new or renovated space and the picture gets even more grim.

Despite the tightening supply in July, Manhattan has 70 percent more space available than when the pandemic began in March 2020. Prospective tenants now have 91.7 million square feet to choose from, according to Colliers.

The average price-per-square-foot of office space in Midtown, Midtown South and Downtown last month was $79.86, $81.06 and $59.47, respectively.

Wallach expects Downtown to prove resilient thanks to its live-work-play focus, having changed from its 1980s work-only ethos.