NEW YORK CITY- Due to the coronavirus pandemic, Manhattan office leasing tenants have pressed pause on contracts for new space, according to a recent Avison Young report.
In the first quarter of 2020, Manhattan office leasing volume was just above 7 million square feet, representing a new first quarter low since the first quarter of 2009 during the Great Recession when leasing volume totaled 5.3 million square feet.
“Office leasing velocity started out the quarter slow in January, followed by an uptick in February, but dropped 39.0 percent in March compared to March 2019,” said Mitti Liebersohn, president and managing director of Avison Young’s New York City Operations in a prepared statement. The coronavirus was declared a global pandemic on March 11, he added.
Although leasing has slowed, it is still too early to see the full impact of the coronavirus on the office leasing market, which could take up until the end of the second quarter, Marisha Clinton, senior director of research, tri-state, said in a prepared statement. “We can potentially expect to see a decline in average asking rents and an increase in the vacancy rate, especially if there is a rise in the amount of sublet space (currently at 27 percent of total vacant space) put on the market, given the inability of some tenants to cover their rent payments,” she said.
According to the report, the overall vacancy rate for the first quarter of 2020 in Manhattan was 10.8 percent, up 110 basis points year-over-year due to less leasing activity. Average asking rents were a record $83.30 per square foot, representing a 3.7 percent increase over the prior year due to higher priced space that came to market.
Overall for the first quarter of 2020, Midtown posted leasing volume of 4.6 million square feet, which was down 14 percent from its five-year quarterly average. There were just six large-block transactions greater than 100,000 square feet executed this quarter versus 11 for the same period a year ago.
For Midtown South, volume of just 929,000 square feet was down 23.0 percent from its five-year quarterly average and the largest deal recorded in this market was only 75,000 square feet.
Meanwhile, leasing volume of 1.5 million square feet also softened for the Downtown market, which was off 24.0 percent from its five-year quarterly average.