Leasing activity jumps in the first half of 2018
After a slow start to 2018, leasing activity jumped in Q2 2018, recording more than 10 million SF, the highest quarterly total since 2014. There were nine transactions recorded exceeding 100,000 SF and 22 transactions above 50,000 SF. The TAMI and law sectors dominated big block transactions, accounting for six of the nine transactions exceeding 100,000 SF. Many of the large block transactions recorded this quarter didn’t have a strong impact on the net absorption figure because much of the space was either pre-leased or was not officially on the market. Most areas in Manhattan posted positive net absorption except for Downtown, where seven large blocks exceeding 50,000 SF were added, primarily in the World Trade Center and Financial District.
Availability and average asking rents hold steady
Both the availability rate and average asking rents held steady, ending Q2 2018 at 11.4% and $74.36 PSF, respectively. Among all markets, Midtown South saw the greatest drop in availability, falling from 9.8% to 9.4%, a robust quarter of leasing activity coupled with no significant new availabilities attributed to the decline. Despite the relative flatness in Manhattan’s overall average asking rent, rental rates remain at an all-time high, but so have oversized concession packages, effectively lowering the overall net effective rents. As a result, renewal activity cooled this quarter, with only one renewal recorded exceeding 50,000 SF, as tenants chose to relocate to take advantage of the higher concession packages.
Sale volume jumps 10% in the first half of 2018
After a sluggish 2017 and early 2018, office sale volume ended at $8.5 billion, with an average price of $911 PSF through the first half of 2018. The sale volume is up 10% compared to the first half of last year. Major transactions recorded this quarter include the sale of 5 Bryant Park, purchased by Savanna from The Blackstone Group and Swig Company for approximately $640 million. Manhattan’s average cap rate remained stable at 4.7%.