Leases  ·  Analysis

There’s More Available Office Space in Manhattan Than Ever Before

A new report shows the pandemic's ill effects continue to linger

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The amount of available office space in Manhattan hit an all-time high of 70 million square feet in the second quarter of 2023, according to Savills, as leasing remained down by 25 percent compared to the second-quarter pre-pandemic average.

The overall availability rate for offices spiked 20 basis points last quarter, reaching 19.7 percent, the highest it’s been since 2017. Meanwhile, tenants leased only 6.9 million square feet in the second quarter of 2023, which was down 6 percent from the first quarter and 18 percent year-over-year, the report found.

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Average asking rents continued to rise, ticking up 0.7 percent to $78 per square foot. Class A rents saw the strongest growth, increasing 1.7 percent to $96 per square foot, while Class B and C rents grew a modest 0.2 percent to $59 per square foot.

The Financial District continues to struggle compared to other Manhattan submarkets and had the highest availability rate last quarter of 29 percent, according to the report. It was closely followed by Park Avenue South at 25 percent and Tribeca and SoHo at 25 and 22 percent, respectively.

The largest transaction that closed during the second quarter was a 640,000-square-foot lease for the city’s Administration for Children’s Services at 110 William Street in the Financial District. Most of the other notable leases were either renewals or expansions, with the second-largest deal being law firm Paul Hastings’ renewal and expansion to 277,227 square feet at 200 Park Avenue.

Marisha Clinton, the senior director of Northeast regional research for Savills, noted that tenants were mostly staying put because they didn’t want to end up in a building where the owner might be giving back the keys to a lender.

“If you have a good quality landlord, they’re better able to put more maintenance and capex into the buildings,” said Clinton. “Tenants want to be in buildings with the most creditworthy owners.”

She pointed out that financial services firm Clayton, Dubilier & Rice left 66,000 square feet at Seagram Building with four years left on its lease just as landlord RFR had $1 billion worth of debt coming due on the property in May. The firm relocated to a much larger, 144,000-square-foot space at the newly renovated 550 Madison Avenue.

Rebecca Baird-Remba can be reached at rbairdremba@commercialobserver.com.