The Manhattan office market had nearly 2.7 million square feet (msf) of new leases transacted through May 2019, led by two deals by WeWork and Knotel in Midtown South and Downtown, respectively.
Vacancy increased for the fifth consecutive month with an average of 1.1 msf of space added per month. In May, the Manhattan overall vacancy rate inched up 40 basis points to 10.6%, as sublease space increased to 8.7 msf – the highest amount since July 2010.
Overall asking rents reached an all-time high of $74.46, an $1.61 psf increase, due to new construction in Midtown South.
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In Midtown new leasing activity totaled 8.6 msf, the second-highest total on record through May, but down 4.1% year-over-year. Overall vacancy increased for the fifth-straight month, up 40 bps in May to 10.6%, as available sublease space reached 5.4 msf, up 52.1% year-over-year and Class A vacancy jumped 40 bps to 10.1% due to more than 200,00 sf of space coming to market at 375 Park Avenue. Overall asking rents increased $1.94 month-over-month to $77.18 psf, but are still down 0.3% year-over-year.
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Midtown South’s new leasing activity reached 793,408 sf in May, bringing 2019’s total to nearly 2.6 msf leased – up 5.1% from one year ago. Vacancy increased 10 bps to 9.1%, but the uptick was offset by new demand stemming from three large blocks leased, each greater than 50,000 sf. Overall asking rents rebounded to $82.97 after dropping below $80.00 psf in April, as space in newly-constructed or repositioned assets entered the market.
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Downtown’s year-to-date new leasing activity increased by 546,986 sf in May to 3.6 msf, up 53.2% year-over-year. Contributing to the uptick, Knotel signed an 80,650-sf lease at 110 William Street. Despite strong leasing activity, the Downtown vacancy rate expanded 70 bps to 11.8%, including a total of 301,513 sf between 225 Liberty Street and 250 Vesey Street. Asking rents dropped only $0.04 psf to $62.84, still 5.9% higher than one year ago.
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