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Manhattan Q1 office leasing slips but market remains strong

[NEW YORK] Leasing activity for office space in Manhattan slipped in the first quarter, but strong jobs growth has kept availability rates low, data showed on Tuesday.

New leasing fell 7.0 per cent to almost 7.1 million square feet (660,000 square metres) in the first quarter, down from 7.6 million square feet a year earlier, with March the slowest month of the period, commercial real estate brokerage Cushman & Wakefield reported.

Leasing activity slid 17.8 per cent from a year ago and declined 22.5 per cent from the fourth quarter, according to different data from brokerage Colliers International.

In part, that was because Twenty-First Century Fox and News Corp signed new and expanded leases totalling 1.2 million square feet at their Sixth Avenue headquarters in the first quarter of 2017 that lifted the comparative numbers for last year's period, Colliers said.

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In addition, fourth quarter activity is generally higher than other quarters as brokers and tenants work to get deals done before the year's end, it said.

Jobs growth in Manhattan rose 2 per cent over the 12 months to February, a rate that was higher than the state's 1.2 per cent and the US rate of 1.8 per cent, the New York State Labor Department has said.

Office space availability has fluctuated around 10 per cent in recent quarters, while sublet availability has been under 2 per cent for a number of years, said Craig Caggiano, an executive director at Colliers.

The steady rate of availability despite more office space being added to the market has shown "a remarkable recovery from our Great Recession lows", said Mr Caggiano.

Average asking rents declined to US$73.05 a square foot from US$73.92 a year ago, but rose from US$72.74 in the fourth quarter of 2017, Colliers said.

Since the market's trough in March 2010, asking rents have climbed 53.2 per cent downtown, 49.2 per cent in midtown south and 24.4 per cent in midtown, according to Cushman & Wakefield.

Building sales almost doubled to US$5.2 billion from a year ago and from US$2.58 billion in last year's fourth quarter as Google closed on its record-breaking US$2.4 billion purchase of Chelsea Market, Colliers said.

The average price per square foot paid for a Manhattan building going for more than US$10 million was US$890, up from US$837 a year earlier, it said.