Manhattan Office Vacancy Drops As Leasing Activity Rises in Q3

The Manhattan office leasing market has seen a very busy third quarter, boasting increases in leasing and decreases in vacancy, thanks to an especially lively summer, according to a new report from Avison Young.

Leasing activity has reached 23.1 million square feet during the third quarter of 2024 — a 25.1 percent increase from the same period last year, the report found. There were also 25 transactions consisting of more than 100,000 square feet during the quarter, up from 18 in 2023.

As for office availability in Manhattan, the overall rate has dropped to 18.7 percent — or 4.8 million square feet — marking the first time availability has fallen below 19 percent since the first quarter of 2021, when the pandemic decimated the city’s office market, according to the report.

“The activity across the New York City market suggests that there is cause for confidence as we turn the corner and enter 2025,” Rory Murphy, Avison Young’s New York City market leader, said in a statement to Commercial Observer. “While transactions continue to take longer to close than pre-pandemic comparisons, there are signals that we could see market activity compress those timelines on the other side of the election.”

Some of the largest leases during the third quarter were Blackstone’s 1.06 million-square-foot renewal and expansion at 345 Park Avenue, Christie’s Auction House’s 406,719-square-foot renewal at 20 Rockefeller Plaza, and law firm Willkie Farr & Gallagher’s 313,086-square-foot renewal and expansion at 787 Seventh Avenue, the report showed.

Direct available space has dropped 5.5 percent from the second quarter of 2024 — the largest quarter-over-quarter dip in recent years — while sublet available space has decreased by 2 percent since the last quarter, according to Avison Young.

Trophy and Class A space have accounted for 76.3 percent of leasing activity so far this year, much of which has been relocations or new spaces, the report found.

And all that leasing activity means more people heading into the office. Manhattan office buildings are 73.4 percent as busy as they were in August 2019, while the U.S. average of “office busyness” remains at 60.4 percent, according to the report. Avison Young uses cellphone data to track people entering offices.  

Avison Young attributed the uptick in office traffic to strong growth in finance and government tenants, with increases in Midtown West and near Central Park specifically.

However, the report also pointed out that upcoming lease expirations could make a dent in Manhattan’s office market revival. Major banking, finance, insurance and real estate tenants make up 41.7 percent of expiring leases from 2025 to 2030 for a total of 42.1 million square feet, according to Avison Young.

Still, the city’s busy third quarter comes thanks to an especially lively summer, which was 19 percent more active than the five-year quarterly average in terms of deals, as CO previously reported. It remains to be seen whether the rest of 2024 will follow suit.

Isabelle Durso can be reached at idurso@commercialobserver.com.