Leases  ·  Office

Manhattan Office Market’s Doldrums Continue With Record Availability in February

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Manhattan’s office market reached a bleak new milestone in February.

The availability rate reached a record high of 18.2 percent last month, a 1 percentage point year-over-year increase and a 0.3 percent jump from January’s 17.9 percent, according to a report by Colliers (CIGI).

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Manhattan’s available supply reached 98 million square feet in February, an annual increase of 5.7 percent. And supply has ballooned 82.1 percent since March 2020, the report found.

A large chunk of that new supply  — about 21 million square feet — is sublet space, according to Colliers. Companies added 560,000 square feet of space to the sublet market last month, the biggest monthly gain since February 2023.

In total, office tenants signed on for 2.3 million square feet of space in Manhattan last month, a 2.1 percent increase from the 2.25 million square feet of total leasing volume in January.

While demand for office space in February was on par with the five-year rolling monthly average of 2.34 million square feet, it remains well below the 2019 average monthly volume of 3.58 million square feet.

Still, Colliers’ Frank Wallach stressed that a poor start to the year doesn’t mean the rest of 2024 will be equally bleak.

“We are still in the early stages of 2024 and the events of January and February do not, by any means, set Manhattan’s precedent for the remainder of the year,” Wallach said in a statement.

The bright spots for February came in Midtown and Midtown South, which saw some of the borough’s biggest office leases of the month. Handbag designer Michael Kors came in first place for its renewal of 203,000 square feet at Tishman Speyer and Silverstein Properties11 West 42nd Street across from Bryant Park.

And discount retailer Burlington Stores took the No. 2 slot for its 170,763-square-foot deal at 1400 Broadway. Burlington has steadily expanded at the building since 2010, taking an additional 67,865 square feet in the most recent deal.

Yet Manhattan’s office market has never been homogenous, Wallach said.

Leasing volume in Midtown more than doubled year-over-year by the end of February and is also up more than 60 percent year-over-year in Midtown South. Yet demand is less enthusiastic downtown, where leasing volume fell 6.8 percent over the same time period.

The variation within the market gets even more interesting.

For instance, the overall availability rate in Midtown was 16.3 percent at the end of February, the highest it’s been since 2022. But for Midtown buildings built after 2000, the rate is closer to 11 percent, according to Wallach.

“The challenges facing the market differ greatly, building by building,” Wallach said.

Abigail Nehring can be reached at anehring@commercialobserver.com.