Leasing Activity Highlights NYC Office Tenants Reluctant to Make Long-Term Decisions
All three Downtown submarkets underperformed their five-year quarterly average during Q3 2020, according to CBRE.
Manhattan leasing activity totaled just 2.57 million square feet in Q3 2020, with Midtown registering 2.01 million square feet, Downtown 455,000 square feet and Midtown South 104,000 square feet, according to CBRE.
One characteristic of this pandemic-driven market has been the reluctance of tenants to make long-term decisions, according to Nicole LaRusso, director of Research and Analysis for CBRE Tri-State.
Not surprisingly, sublease space has increased markedly, CBRE also reported. A total of 14.31 million square feet 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 during the quarter to 13.6% and is 250 bps higher than in Q3 2019. Net absorption was negative 6.57 million square feet in Q3 2020, bringing the year-to-date total to negative 10.31 million square feet.
Midtown’s leasing activity for the quarter was 51% below its five-year average, and down 33% from Q3 2019.
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 square feet in Q3 2020. Unlike in Q2, however, Q3 did see an uptick in renewal activity to 225,000 square feet.
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 square feet of leasing activity.