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Market Research - New York

United States: New York/ Manhattan office market - H2 2021

Manhattan's recovery is underway and gained momentum through 2021.

Manhattan posts absorption of negative 15.8 million SF 


Manhattan's recovery is underway and gained momentum through 2021. Employment has improved considerably from the April 2020 bottom and is now within 10% of the pre-pandemic peak level. While workers are returning, many NYC offices are still not fully reoccupied. Sublet space additions continued to ease and the decline in sublet space helped lower the overall availability rate. Net absorption turned positive in the last two quarters of 2021 as leasing activity ramped up. Absorption for the full year was negative 15.8 million SF, slightly better than 2020. 


High vacancy continues to hinder rent growth

Vacancy remains elevated in Manhattan as spaces left empty during COVID have been slow to fill. The direct vacancy rate rose by 20 basis points from year-end 2020 and is now 40 bps above the pre-pandemic level. Availability also increased year-over-year, though it has  fallen for two straight quarters, led by a decrease in sublet availability. The elevated vacancy and availability rates are pressuring rents, which have fallen for seven straight quarters. However, the lower asking rates also reflect the flight to quality: as high-rent spaces are now being leased up, lower priced spaces are left on the market.


Sales volume increases 43% year-over-year


Manhattan rolling 4-quarter sales volume reached $12.8 billion in 2021, some 43% higher than the 2020 result. Four-quarter office volume was $10.9 billion, a gain of 57.3% from the 2020 total. The average office sale price was $849 PSF for the full year 2021, an improvement of nearly 11% over 2020, though pricing is difficult to pin down since there have been few true core office sales since the pandemic began. The largest office transaction of 2021 was the $1 billion dollar sale of Hudson Commons at 441 Ninth Avenue. Manhattan cap rates for prime office deals as well as the overall office market each saw a 0.1 basis point decline from 2020, ending the year at 4.8%. 


AAG New York H2 2021
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