Manhattan Office Leasing Declines 47 Percent in Q4: Colliers
Manhattan office leasing declined by nearly half in the fourth quarter of 2022 compared to the previous quarter, according to Colliers (CIGI), striking an ominous note for the city’s office market as it enters a fourth year of the pandemic.
With 4.9 million square feet of space leased, it was the lowest quarterly leasing volume since the second quarter of 2021 and the sharpest quarterly drop since the pandemic began in March 2020, the report found. Fourth-quarter leasing was also down 43 percent from the same time in 2021.
Overall, 2022 was still a fairly strong year for leasing. Tenants inked 29.1 million square feet of deals, which was 16 percent higher than 2021’s yearly total and 53.5 percent higher than 2020, when the pandemic was at its peak. Average asking rents are also slightly higher than they were in 2021 at $75.41 a square foot, up from $75 per square foot. Manhattan’s overall availability rate has also declined slightly from 17.3 percent in 2021 to 16.9 percent last quarter.
Frank Wallach, Colliers’ research chief, noted that demand for Manhattan office space declined 50 percent from the third to fourth quarters of 2022. Before that, tenant demand for offices indicated that Manhattan might reach a pre-pandemic level of office leasing for the year, or at least 30 million square feet leased. However, the combination of rising interest rates, recession fears and a pullback in tech leasing combined to slow leasing at the end of 2022.
Lower Manhattan, meanwhile, is already benefiting from a renewed pipeline of office-to-residential conversions. While Downtown leasing and demand were both anemic, the area achieved positive office absorption — meaning more space leased than available — for the first time since March 2020. That was largely thanks to GFP Real Estate’s decision to pull 800,000 square feet of vacant space at 4 New York Plaza — now 25 Water Street — off the market in order to convert the building to apartments. Wallach also pointed to residential conversions in the works at 55 Broad Street and 90 John Street.
“Will that be enough to bring Downtown back to the 10 percent availability rate that it had in March 2020?” asked Wallach, referencing the first month of the pandemic. “We’ll have to see once those buildings are finished if that helps with the availability there.”
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