Manhattan Office Sublet Activity Remains Low

NEW YORK CITY—Office leasing volume picked up compared to March and April, according to a recent report from Colliers, but leasing in May was well below the average monthly volume during 2019. According to the report, despite frequent rumors of sublet space scheduled to enter the market, very little sublet inventory was listed.

As a result, the report says that the sublet availability rate was lower in May. This was the second consecutive month of flat or tightening sublet availability in Manhattan.

For downtown, at 1.42 million square feet, Manhattan’s monthly leasing activity in May increased by 5.2% compared to the prior month and was higher by 21.9% compared to March. But, with only six separate 50,000-plus-square-foot leases in May, the report notes that year-over-year leasing volume was lower by more than one-half and was 60.4% below the 2019 average monthly volume of 3.58 million square feet.

By comparison, 14 separate 50,000-plus SF leases closed in May 2019, including two leases greater than 250,000 square feet. Despite large blocks of space added to the available inventory at 1540 Broadway (252,000 SF) and 390 Park Avenue (196,000 SF), Manhattan’s monthly availability rate remained stable at 10.3%, the report says. Sublet availability tightened by 0.1 pp (percentage points) to 2.2% and monthly absorption was essentially flat at negative 0.09 MSF. The average asking rent was lower by 0.4% since April to $79.24/ SF.

In looking at midtown, with three separate 100,000-plus-square-foot lease transactions taking place in Midtown, monthly leasing activity in May (0.97 MSF) increased by 56.0% since April. However, leasing volume dropped by 15.5% year-over-year and was 26.4% below the average monthly volume in 2019 (1.32 MSF).

The report says that led by blocks of space added at 1540 Broadway and 390 Park Avenue, the monthly availability rate increased by 0.2 pp to 11.8%, the highest since 2014. Absorption was negative – for the third consecutive month – at 0.33 MSF. Midtown’s asking rent average decreased by 0.6% to $85.37/ SF, driven by the addition at 1540 Broadway along with above-average priced space leased and removed from the inventory at 151 West 42nd Street, the report says.

Midtown South leasing volume increased by more than 50% since April to 0.32 MSF. However, the report says that May 2020 leasing was 65.1% below the 0.92 MSF of activity recorded in May 2019 and was 76.6% below the 1.37 MSF monthly leasing average in 2019. MSG’s 60,000 SF renewal at Penn 2 was Midtown South’s largest transaction.

Despite the drop in leasing activity, availability tightened by 0.1 pp to 8.3% and absorption was positive at 0.24 MSF, the report notes. This was the second consecutive month of tighter availability and positive absorption due to the lack of any sizeable (50,000+ SF) blocks of space added to the available inventory in May. The monthly average asking rent decreased by 0.5% to $77.53/ SF.

Downtown’s monthly leasing volume (0.13 MSF) dropped by more than 75% since April and was lower by 86.3%, year-over year, the report says. Leasing volume in May was 85.9% below the 0.89 MSF monthly leasing average in 2019. The 86,000 SF new lease by Policygenius at 32 Old Slip was Downtown’s largest transaction.

Despite the drop in leasing volume, the report says that the availability rate was stable at 10.5% while absorption was virtually flat at positive 113 SF. The only 50,000+ SF block of space added to the available inventory in May was at 100 Church Street (92,000 SF). The average asking rent decreased by 0.2% to $66.05/ SF, led by the leasing of above-average priced space at 32 Old Slip and lower-repricing at 25 Park Row (52,000 SF).