Manhattan Office Leasing Plunges 50 Percent

Amid the coronavirus pandemic, leasing activity fell to its lowest levels since 2013

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Manhattan’s office market just had one of its worst quarters in nearly a decade in the wake of the coronavirus pandemic, which led to a 50 percent drop in leasing activity compared to the end of last year, a report from Colliers International found.

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In the first quarter — which runs from January 1 to March 31 — leasing activity reached 6.82 million square feet, compared with 13.2 million square feet in the fourth quarter of 2019, the report said. The activity marks a 24.8 percent drop from 9 million square feet in the first quarter of last year. 

While leasing activity does tend to fall at the start of the year, the past quarter represented the lowest quarter on record in the borough since the third quarter of 2013, according to Colliers.

“Overall leasing volume decreased across Manhattan and we will continue to monitor the impact of COVID-19 on the market as we enter the second quarter,” Franklin Wallach, a senior managing director of Colliers’ New York research team, said in a statement. “However, the New York City office market has been tested numerous times over hundreds of years through wars, diseases, natural disasters, recessions and terrorist attacks. Each time, the New York City market comes back stronger.”

Leasing activity so far this year was also 26.3 percent below Manhattan’s five-year average of 9.25 million square feet and 18.9 percent below its 10-year average of 8.41 million square feet, according to the report.

Manhattan’s availability rate increased by 0.2 percentage points to 10.2 percent and net absorption in the first quarter was negative 1.46 million square feet, marking the first time since 2009 that Manhattan had three consecutive quarters of negative absorption and increased availability, the report found.

Even as the coronavirus threw the global economy and Manhattan’s leasing market into turmoil, the borough did have some bright spots, especially Lower Manhattan, Wallach said.

“The Manhattan office market is not at all homogenous,” Wallach said. “As the first quarter ended, there were clearly pockets — such as Lower Manhattan — that outperformed the rest.”

While Lower Manhattan did have a 33.9 percent drop in leasing volume between the first quarter of 2019 and the first quarter of 2020, it still made a strong showing, according to the report.

Lower Manhattan made up 24.8 percent of the total leasing activity in the borough in the first quarter of 2020, higher than the 19.2 percent it averaged in the past ten years. Its asking rent also increased to a record of $65.79 square foot.

The largest deal of the quarter came in January when law firm Debevoise & Plimpton signed on to move its headquarters to 530,000 square feet in Tishman Speyer’s under-construction The Spiral in Hudson Yards.