Manhattan Office Leasing Jumped 45% in Q4

Major technology firms helped drive 8.3 million square feet of space commitments, according to a new report by Transwestern.
Manhattan. Image courtesy of JaxsonD via Wikimedia Commons

Manhattan’s office market rebounded in the last three months of 2019 after a sluggish third quarter, with tech giants helping to boost overall leasing activity by nearly 50 percent, according to the latest market report by Transwestern.

Office leases totaling 8.3 million square feet were inked across the island in the fourth quarter, up 46 percent from the previous quarter, the study finds. The year’s total came to 29.5 million square feet of activity, higher than the historical yearly average of 27.4 million square feet, but down 15 percent compared to 2018. 

Despite the flurry of activity, 13 large blocks of space exceeding 100,000 square feet became available in Manhattan, most of them in Midtown. This caused the borough to register 657,000 square feet of negative absorption, with overall availability ticking up 0.1 percent to 11 percent.

The Downtown submarket, embracing everything south of Canal Street, had a standout year, posting more than 8 million square feet of total absorption—the highest figure in more than two decades. Average rent across Manhattan climbed 8 percent quarter-over-quarter to a historic high of $81.11 per square foot by the end of the year, including all-time highs of $88.12 and $84.11 in Midtown and Midtown South, respectively.

Tech titans take more space

3 World Trade Center. Image courtesy of JJBers via Wikimedia Commons

Twenty-two new leases exceeding 50,000 square feet were signed during the fourth quarter, including nine surpassing 100,000 square feet. The TAMI (technology, advertising, media and information) sector drove almost half of all leasing activity during the quarter, with household names bagging some of the largest space commitments.

Facebook more than doubled its office footprint in Manhattan by snapping up 1.5 million square feet across three buildings at the Hudson Yards mega-project, including 1.2 million square feet at 50 Hudson Yards. Amazon inked a 335,408-square-foot lease with landlord SL Green at 460 W. 34th St. in Midtown, while Uber took nearly 308,000 square feet at Silverstein Properties’ 3 World Trade Center in Lower Manhattan.

Other massive leases included law firm Cravath, Swaine & Moore becoming the anchor tenant at 2 Manhattan West by grabbing 481,000 square feet at the Far West Side tower being developed by Brookfield Properties. Tishman Speyer signed up global advertising and public relations firm Dentsu Aegis Network for 320,000 square feet in its office redevelopment at 341 Ninth Ave.

Manhattan currently has 13.1 million square feet of office projects under construction, the bulk of which is situated in the Hudson Yards and Manhattan West area. Transwestern expects market fundamentals to remain healthy through 2020, with average rents continuing to grind skyward as landlords invest in upgrades to compete with new projects.

The wave of development, along with space left behind by tenants relocating to new and renovated properties, is poised to bring many large-scale blocks of availability to the market throughout this year and beyond.