Manhattan’s market has all but frozen over in January.
Office leasing activity plummeted for the month, thanks to lagging demand, with office availability at an all-time high for the second straight month.
Total activity for the month ended at 2.25 million square feet, barely half the volume from last January, and a fall of almost 40 percent from December. The data comes from Colliers’ latest Manhattan office leasing report, which covers Midtown, Midtown South, and Downtown.
The report shows the latest signs of a stubborn office market, where availability has stood pat at 17.9 percent for two months. Even in the busiest of months, the amount of office space coming onto the market has often outstripped leasing volume. But in January, leasing volume fell below the five-year monthly average of 2.35 million square feet.
The drop in leasing didn’t surprise Colliers’ Frank Wallach, the report’s author, who said January often brings a drop in leasing after tenants rush to sign leases in December. The fourth quarter of 2023 was the strongest period since mid-2022, paving the way for the slow start to this year.
One or two megaleases can make all the difference between a lackluster month and a solid one. But January saw no such megaleases, and only four leases over 100,000 square feet.
The biggest lease came courtesy of law firm King & Spalding, which signed a new lease for 175,000 square feet at Vornado Realty Trust’s 1290 Sixth Avenue. For comparison, there were at least four leases over 250,000 square feet in December, including one record-setting lease of over 765,000 square feet.
Other major deals include Intercontinental Exchange, Inc., which signed a new lease for 143,000 square feet at Fisher Brothers’ 1345 Sixth Avenue, and the Archdiocese of New York’s new lease for 142,00 square feet at the Feil Organization’s 488 Madison Avenue.
The sublet market stayed busy in January, with large blocks of space hitting the market and leaving it.
More than 400,000 square of sublet space hit the market at Rudin Management’s 1675 Broadway, while BXP’s 200 Fifth Avenue saw a 336,000-square-foot chunk become available for sublease.
Still, most of the damage done was recovered, as sublet space was either leased or taken off the market. Altogether, available sublet space increased by just 47,000 square feet for the month, and has actually decreased throughout the borough by 1.4 percent over the last year.
Office leasing continues to be a fractured market across Manhattan, with each neighborhood facing different demand.
Leasing in Midtown fell by almost half from December, at 1.34 million square feet leased. But that was enough to outdo its monthly average for the last five years. Midtown South had its worst leasing total in six months at 0.53 million square feet , while Downtown saw a modest decline from December to 0.39 million square feet.
Even within each neighborhood, demand can vary vastly from one avenue to the next, Wallach said. In Midtown, the average availability on both Sixth Avenue and Park Avenue sits around 11 to 12 percent. Third Avenue is closer to 20 percent, though that’s a stark improvement from the 25 percent availability rate in early 2023.
Typically, 10 percent availability is a healthy equilibrium for a market, Wallach added.
Asking rents ticked downward by a few cents for the month, to $74.64 per square foot annually, as the highest quality, most expensive space becomes harder to come by.