Manhattan Office Leasing Drops 43%, Despite 1.2M SF Fox Deal

Despite an unexpected package unwrapped this week down the street from Rockefeller Center’s Christmas tree—a 1.2M lease renewal by Fox Corp. and its News Corp. spin-off of their HQ at 1211 Sixth Avenue, the largest NYC office lease in three years—net absorption turned negative in Manhattan in Q4 as leasing activity plunged by nearly 43%.

Manhattan’s fourth quarter net absorption total of negative 346K SF left the largest US office market with an annual net absorption of negative 1.6M SF, according to a Q4 market report from Newmark.

The Q4 absorption total marked an abrupt turnaround from the positive absorption in Manhattan of more than 2.5M SF recorded in Q3. The downturn was most pronounced in Midtown, which recorded negative net absorption of more than 1M SF in Q4.

The 5.9M SF of leasing activity in Manhattan in Q4 was the lowest leasing velocity total in seven quarters, Newmark said.

The flight to quality by office tenants continued to dominate transactions in Manhattan, with nearly 70% of fourth-quarter leasing activity leaded in Class A space.

The availability rate in Manhattan ticked up to 18.7% from 18.4% in the previous quarter, while overall average asking rents plateaued at $74.29/SF, just a few cents lower than the $74.73 recorded in Q3.

Fifteen listings of at least 100K SF feet came to market the fourth quarter, eight of which were subleases. Direct blocks became available at 555 West 57th Street, PENN1, 511 Fifth Avenue, 120 Park Avenue, 120 Broadway, 625 Avenue of the Americas, and 350 Fifth Avenue, Newmark reported.

On the brighter side, Fox News and News Corp. announced this week that Rupert Murdoch’s media empire is renewing its lease on its headquarters at the 45-tower at 1211 Sixth Avenue. According the company’s release and Newmark’s report, the deal closed before the end of 2022.

Fox Corp. occupies 670K SF and News Corp. occupies 486K in the tower, which is owned by Ivanhoe Cambridge and operated by Hines. According to the company’s release, both leases were extended through 2042.

Fox’s decision to remain in a 50-year-old office building and maintain its current office footprint stands in stark contrast to the migration of tech and media companies to new Class A office buildings in Manhattan, and to an ongoing wave of office footprint downsizing, particularly by tech players.

The company’s release said the owner has agreed to an upgrade that will include new entrances and outdoor plazas, as well as a new tenant lobby accessible from 47^th St. and a renovated lobby on Sixth Avenue, a.k.a. Avenue of the Americas.

CBRE represented Fox and News Corp. in the transaction, while a Cushman & Wakefield team represented the landlord.