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Market Research - New York

United States: New York/ Manhattan office market - H1 2021

Manhattan began a cautious reopening in 2021, but continues to battle the effects of the COVID-19 pandemic

Manhattan posts negative absorption of 16.0 million SF 


Manhattan began a cautious reopening in 2021, but continues to battle the effects of the COVID-19 pandemic. Employment has improved considerably from the April 2020 bottom, though still 11.% below pre-pandemic peak level, and while some of the workforce has begun to return, many offices still are not fully reoccupied. 
Net absorption measured negative 16.0 million SF in the first half of the year, due to a combination of subdued leasing and large block additions. Sublet space additions are still a concern, though these have lessened somewhat, and some occupiers have taken back spaces they had listed. Several large new leases were signed in 2021, including Mt. Sinai/Icahn School of Medicine's 167,300 SF lease at 787 Eleventh Avenue, SPARC Group's 155,700 SF lease at 11 Penn Plaza, and Houlihan Lokey's 148,200 SF lease at 245 Park Avenue. 


Rents continue to fall, pressured by rising availability

While the number of large block additions has lessened from its 2020 frenzy, new blocks are still driving availability up across Manhattan. The availability rate rose 340 basis points from year-end 2020 to 18.2% in the first half of 2021, more than 700 basis points above the pre-pandemic level. 
All three of Manhattan's major submarkets have experienced a significant increase in availability since the fourth quarter of 2019, and sublet availability now accounts for almost 26% of the overall rate.  
Manhattan and its three main submarkets had been experiencing peak rent levels just prior to the pandemic; rents continued their decline in 2021 but have fallen less than 15% from their pre-pandemic heights. Most recently, Manhattan rents fell 6.5% from year-end 2020 to $70.69 PSF.


Sales volume decreases 62% year-over-year


Rolling 4-quarter sales volume approached $5.6 billion in the second quarter of 2021, some 61.8% below the mid-year 2020 result. Four-quarter office volume was $4.6 billion, a drop of 60.2% from the $11.5 billion tallied in the prior four quarters. The average office sale price was $867 PSF in the second quarter of 2021, an improvement over year-end 2020, as several large deals were completed. 
The largest transaction was the $325 million dollar sale of 635-641 Sixth Avenue. Other large office transactions included the sale of 520-524 Broadway for $323.5 million and 11 East 26th Street for $235 million. 
Manhattan cap rates were unchanged from year-end 2020 at 5.0%, while prime cap rates declined by 20 basis points to 4.6% over this same time period. 

AAG New York H1 2021
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