NEW YORK CITY- Manhattan office leasing experienced a healthy start to the year in January and February with a drop in availability and rise in rents. However, that would soon be over when coronavirus, also known as COVID-19, arrived in March, pausing the market and leasing activity with it, according to a new report on Manhattan office leasing from Newmark Knight Frank.
According to the report, by the end of the first quarter of 2020, Manhattan availability dropped 20 basis points quarter-over-quarter to 11.8 percent. Three large blocks of more than 100,000 square feet came on the market, two of which were at 1740 Broadway. Despite the minimal additions of space, low leasing velocity pushed quarterly absorption to negative 766,209 square feet.
In March, the pandemic and social-distancing measures brought the office market to a standstill, pushing the nation’s workforce out of the office and into their homes to work. As a result, deal-making dropped, tours stopped, and office construction was ordered to halt, the report noted.
By the end of the first quarter, leasing activity totaled 6.2 million square feet, the lowest first-quarter level since the first quarter of 2009.While the duration of the pandemic’s impact is currently unknowable, insight from prior downturns have offered helpful context. The global financial crisis caused availability to rise for three quarters, followed by an 18-quarter recovery. After September 11th, availability increased for nine quarters, followed by another nine quarters to achieve recovery, according to the report.
Before the onset of COVID-19, average asking rents were on an upward climb, and ended the first quarter at $81.71 per square foot.