The overall office vacancy rate in Manhattan notched another new record in Q2 2023, rising 60 bps to 16.7%, as leasing activity hit levels last seen in Q1 2021.
Leasing activity in Manhattan totaled 3.9M SF in the second quarter, a dip of nearly 24% from the first quarter and a YOY drop of almost 47% that was exacerbated by the delivery of an equal amount of inventory in Q2, according to JLL.
Average direct asking rents for Manhattan offices fell by $1.11 to $81.61 per SF, bringing direct asking rents back to the same level a year ago in Q2 2022, JLL said.
"While overall indicators would suggest highly tenant-favorable conditions market-wide, the right spaces in the best buildings in prime locations are now few and far between," JLL noted.
A glimmer of a bright spot appeared in sublease vacancy, which dropped by 700K SF, the first decrease in five quarters.
According to bullet points released on Thursday by CBRE, Manhattan's net absorption in the second quarter was negative 884K SF, bringing the total year-to-date to negative 2.75M SF.
The office availability rate in Manhattan was up 20 bps to 19.9%, up 70 bps from a year ago, CBRE said.
In its breakdown of Manhattan submarkets, CBRE said leasing activity in Midtown totaled 2.53M in Q2, with year-to-date leasing activity totaling 5.05M SF, down 34% from the same time last year. The availability rate in Midtown remained at 18.5%, the same level as the first quarter.
The availability rate in Midtown South surged to 21.2%, an 80 bps increase over the first quarter and a 230 bps jump from a year ago. Net absorption in Midtown South was 679K SF in Q2, bringing the YTD total to negative 2.04M SF.
Year-to-date leasing activity in Downtown totaled 1.63M SF, up 10% from the same time last year. Net absorption was negative 448K SF Downtown in Q2, with a YTD total of negative 172K SF, CBRE reported.
JLL said it expects the pace of deliveries to slow down. "With financing costs expected to remain elevated due to higher interest rates, the pipeline of new or renovated supply is narrowing," the report said.
With higher borrowing costs and tighter access to funding, landlords find it hard to offer competitive incentives including free rent and T.I. allowances, constraining their deal-making ability with prospective tenants and forcing them to offer more flexible leasing terms.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.