Leases  ·  Office

Manhattan Leasing Momentum Creeps Toward Pre-Pandemic Levels in Q2

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Office leasing activity in Manhattan is making solid progress in 2024 toward returning to pre-pandemic levels, but there’s still a way to go.

The borough saw 8.17 million square feet of office space rented out in the second quarter, according to a report from Colliers (CIGI). The first half of the year saw 14.51 million square feet of space leased so far.

SEE ALSO: Gold Rush for Manhattan Retail Space Waning, Thanks to Lack of Availability

Leasing volume for the year is expected to exceed what was absorbed in 2023 by about 6.5 percent and will be on par with the 29 million square feet leased in 2022, according to the report. That’s still not going to come close to the 42.97 million square feet recorded by Colliers in 2019.

Yet, the numbers are looking good when you look at the big picture, according to Frank Wallach, executive managing director of research and business development at Colliers.

“If you take the leasing activity that we had each full year for roughly the period between 2010 and 2019, you had in any given year around 32 to 33 million square feet of leasing activity for the full year,” Wallach told Commercial Observer. “So if we were to cross over that 30 million-square-foot threshold, that really would be a notable milestone in activity, getting back to that pre-2020 level.”

Major factors impacting the data include the conversion of buildings like 111 Wall Street to residential, taking over a million square feet of space off the market for reasons other than leasing, and the larger deals like Bloomberg renewing its 946,815-square-foot office lease at 731 Lexington Avenue in May, making some months look rosier.

“Demand outpaced supply for the quarter, and you know that led to more than a million square feet of positive absorption, and the availability rate went from 18.1 percent down to 17.9 percent,” Wallach said. 

And flight to quality to Class A space is still alive and well, despite the fact that supply in the category is running short, according to Wallach. Class A captured more than three quarters — or 76 percent — of all demand in Manhattan during the second quarter.

Average asking rent for Class A office in the second quarter was $80.38 per square foot while Class B was $66.71 per square foot and Class C was $48.48 per square foot.

So what’s the outlook for the future of supply and demand for Class A space?

“In any given year, about 15 to 20 million square feet of leases roll. It’s weeks or months before a tenant might make a decision on [whether to renew],” Wallach said. “So there’s still an unknown amount of future space, including an unknown amount of Class A space that will re-enter the market.”

Mark Hallum can be reached at mhallum@commercialobserver.com.