The Manhattan office market has seen a large volume of leasing competed this year. In February alone, Cushman & Wakefield research reported total new leasing in Manhattan of 4.02 million square feet (msf), the largest monthly new leasing volume since May 2011 and only the second time since we started reporting monthly statistics that new leasing has exceeded 4.0 msf. The strong February coupled with a healthy 2.7 msf of new leases signed in January already puts first quarter new leasing above the 6.0 msf quarterly average of the past decade. If we have an average leasing month in March, total first quarter leasing will top 8.5 msf, the strongest first quarter since the go-go years of the dot-com boom in 2000 and 2001.
There have also been an unusually high number of large leases signed in the past six months, both new leases and renewals. Since September, a total of 38 leases have been signed for 100,000 sf or more. That’s an annual rate of 76 large deals. Since 1996, the highest number of 100,000 sf or more transactions completed in any single year was 51 in 2011.
The strength of leasing in January and February was partly a result of transactions that did not get completed at the end of 2013, but the healthy level of leasing extended well back into 2013. In the six months from September 2013 through February 2014, new leasing totaled 16.2 msf, the strongest half year since the first half of 2011.
What does all this leasing mean? For one, there is a change in the makeup of the tenant base in Manhattan with a new wave of large tenants in industries that are relatively new to New York City entering this market and establishing themselves. Some examples of these new large tenants who have taken space over the past several years are: Twitter, Facebook, Google and LinkedIn. Yes, the technology/creative sector has become an important force in the Manhattan office market and these more mature tech companies are large users of space. They are all relatively new to the Manhattan market and are having an impact on the market. In addition, other more traditional creative and media tenants have been active. Overall, there were nine leases of more than 100,000 sf by tenants in the TAMI (Technology, Advertising, Media and Information) industries during the last six months.
At the same time, many of the large leases signed in the past six months are traditional Manhattan office users: financial services accounts for nine of the total, and legal services five. For these companies some have had expiring leases, but others have sought to make transformational moves to new locations or new construction. These tenants are using real estate as a tool to change their corporate culture.
The readiness to commit to long term leases in Manhattan by both new and long-term tenants is a vote of confidence for the New York City economy. It shows that firms of all types want to tap into the talented labor force and rich cultural environment that the City offers. It suggests that New York City remains one of the top locations for global corporations.