The Manhattan office market reflected continued leasing restraint in the third quarter of 2020 due to the COVID-19-related economic slowdown and New York City’s cautious approach to reopening the local economy. CBRE reports that Manhattan leasing activity totaled just 2.57 million sq. ft. in Q3 2020, with Midtown registering 2.01 million sq. ft., Downtown 455,000 sq. ft. and Midtown South 104,000 sq. ft.
“The ongoing uncertainty of the pandemic has led many occupiers to renew leases nearing expiration, pushing off longer-term commitments and relocations decisions,” said Nicole LaRusso, Director of Research and Analysis for CBRE Tri-State.
The economic decline brought on by COVID has caused sublease space to increase markedly. A total of 14.31 million sq. ft. of sublease space is available in Manhattan, up from 11.22 million square feet at the end of Q2 2020, and currently accounting for 25% of total available space. The availability rate rose 150 basis points (bps) during the quarter to 13.6% and is 250 bps higher than in Q3 2019. Net absorption was negative 6.57 million sq. ft. in Q3 2020, bringing the year-to-date total to negative 10.31 million sq. ft.
Midtown’s leasing activity for the quarter was 51% below its five-year average, and down 33% from Q3 2019. While leasing remained lackluster, Facebook’s 740,000 sq. ft. commitment at the Farley building at 390 Ninth Avenue was seen as a vote of confidence in the long-term appeal of the New York office market.
Midtown South had one of its slowest quarters on record, with weakness across all key fundamentals. After dropping sharply in Q2, leasing fell to just 104,000 sq. ft. in Q3 2020. Unlike in Q2, however, Q3 did see an uptick in renewal activity to 225,000 sq. ft.
All three Downtown submarkets underperformed their five-year quarterly average during Q3 2020. The Financial submarket fared the best during the quarter, recording 341,000 sq. ft. of leasing activity.
The full Q3 2020 Manhattan Office MarketViews are attached.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2019 revenue). The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
