Manhattan office leasing posts strongest start since 2014
Concessions are still 30 per cent higher than they were before the pandemic. And owners of lower-tier buildings have been struggling to fill space
MANHATTAN’S office leasing is off to its strongest start to a year in more than a decade, a positive sign for the beleaguered market.
In January and February, the amount of space leased totalled 5.13 million square feet (476,600 square metres), the most for that two-month period since 2014, according to a CBRE Group report that measures new deals, expansions and pre-leasing. In February alone, leasing was about 1.5 times more than the five-year monthly average.
The uptick helped cut the office availability rate to 18.4 per cent in February, down 10 basis points from a month before. It’s a boon to the city’s office market, which has been grappling with higher vacancies ever since the pandemic spurred more companies to allow employees to work from home.
Employers in the city including JPMorgan Chase and Major League Baseball have pushed for workers to come back to the office five days a week. Companies are also seeking more office space. A Bloomberg Intelligence survey suggests about 41 per cent of New York employers are planning to expand their offices.
Tenants are favouring newer and renovated properties. Universal Music Group is said to be in talks to take about 300,000 square feet of space at Vornado Realty Trust’s upgraded Penn 2 building.
The increasing demand for top-tier office space is shifting power back to building owners. According to data on 12 US markets, incentives landlords offered tenants, such as free months of rent or funds for building out the space, declined on average last year for the first time since CBRE starting tracking the measure in 2019.
“The decrease in concessions last year is another sign of stabilisation and nascent recovery in the office market,” said Mike Watts, CBRE’s president of Americas investor leasing.
Despite the signs of strength, office owners are still dealing with fallout from the shift in tenant demand, as well as high interest rates. Concessions are still 30 per cent higher than they were before the pandemic. And owners of lower-tier buildings have been struggling to fill space. BLOOMBERG
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