Manhattan Office Leasing Cools For Year-End Ramp Up
New construction coming online and, or shadow space in Midtown contributed to negative net absorption for Q3.
NEW YORK CITY- Manhattan office leasing has cooled this past quarter with a slowdown in leasing activity, and high negative net absorption in the Midtown market, its highest since 2009, according to a recent Transwestern data report.
For the third quarter, Manhattan leasing activity totaled 5.7 million square feet, bringing the year-to-date total to 21.2 million square feet, down 12% from the same period last year. Manhattan office saw a negative 1.7 million square feet net absorption, whereas Midtown Manhattan saw a negative 2.1 million square feet of net absorption, its highest since 2009.
“Compared to what happened thus far in 2019 to 2018, it appears the sky is falling. And that is not the case when last year set a lot of records,” Danny Mangru, research manager at Transwestern in New York, tells GlobeSt.com.
New construction coming online and, or “shadow space” in Midtown, contributed to the negative net absorption. On top of that, fickle demand has not kept pace with the bevy of new product. While the data holds some significance, there is a caution to exercise to the reported negative net absorption, according to Mangru.
For instance, law firm Skadden signed a lease a few years ago at 1 Manhattan West to later leave 151 West 42nd St., which has now become “shadow space” and just came onto the market this quarter, now that Skadden is close to moving.
At some point, the market will absorb the new product. There are lease signings underway for the new construction, which are unaccounted for in the data. When the anticipated leases are signed, it could decrease negative net absorption, according to Mangru. “You don’t see the full effect of leases signed to new construction. It matters,” he said.
And with several leases in the pipeline, the market is expected to pick-up in the fourth quarter. Lease negotiations are underway for 50 Hudson Yards; Cravath Swaine & Moore has inked a deal to move its headquarters to Brookfield Properties’ Two Manhattan West; Uber is close to signing at 3 World Trade Center.