Manhattan posts 657,000 SF of negative net absorption
The Manhattan office market bounced back after a slowdown in Q3, recording 8.3 million SF of leasing activity. Leasing activity totaled 29.5 million SF for 2019, which is 15% lower than the 2018 figure, but 7% above the historical five-year average. The TAMI sector accounted for almost half of leasing activity during the quarter and 35% for the year. Despite a robust quarter, Manhattan posted approximately 657,000 SF of negative absorption as a result of 13 large blocks exceeding 100,000 SF being added.
The Downtown market continued its strong momentum recording five new transactions exceeding 50,000 SF, including one topping 100,000 SF, attributing to 1.9 million SF of leasing activity and 18,000 SF of positive absorption. Downtown’s year-end leasing total exceeded 8 million SF, the highest leasing total in over 20 years.
Availability increases, average asking rents at all-time highs
Manhattan continued to see the impact of large block additions and, as a result, the availability rate increased to 11.0%, up 0.4% year-over-year. The majority of the large block additions were in Midtown, which saw its availability rate increase to 11.4%, its highest level since 2016. Midtown South’s availability rate increased to 8.4%. Despite a modest increase in Downtown’s availability rate to 12.1%, it was the lowest year-end level since 2015. The average asking rent across Manhattan increased 8% year-over-year to an all-time of $81.11 PSF, marking the third consecutive quarter asking rents topped $80 PSF. Midtown’s average asking rent increased 2% to an all-time high of $88.12 PSF, due primarily to high-priced space being added in the Plaza District and Times Square submarkets. High-priced space added in the Hudson Square submarket contributed to Midtown South’s average asking rent posting a 1% increase from last quarter to $84.11 PSF, also an all-time high.
Sales volume decreases 25% year-over-year
Total sales volume ended 2019 at $14.5 billion, down 25% from last year. The average sale price was $810 PSF. The largest transaction recorded this quarter was the 99-year leasehold of 341 Ninth Avenue (Morgan North Post Office) by Tishman Speyer from the U.S Postal Service for $798 million. Manhattan’s average cap rate remained stable at 4.8% whilst the prime stabilised at 4.0%.