Availability decreased in Q2 for Manhattan office space, as the leasing volume in Manhattan also decreased by 3.9% from last quarter.
FIRE (Financial, Insurance, Real Estate) tenants were particularly active in Q2, as they accounted for almost half of the leasing share of activity.
Alongside these developments, the average asking rent in Manhattan continued to increase. Let’s take a closer look at office space activity in Manhattan in Q2 2022.
General Area Overview & Demographics
Manhattan is one of the five boroughs that, along with Staten Island, Queens, Brooklyn, and the Bronx, make up New York City. The majority of the borough is located on Manhattan island, surrounded by the East, Hudson, and Harlem Rivers.
Manhattan has a large population of 1.63 million citizens, making it the most populous of the five boroughs. Manhattan is the most densely populated city in the country, as it has a population density of 70,826 people per square mile in the borough.
Manhattan is just 23 square miles in total, which explains this extremely high population density. This large number only increases during the weekday, as commuters entering Manhattan can push the population density to 170,000 people per square mile.
The unemployment rate of Manhattan has been stabilizing closer to pre-pandemic levels. Manhattan had an unemployment rate of 4.5% in March of 2020. As of May 2022 the unemployment rate was 5.7% after ballooning up to 21% during the pandemic.
Summary of Manhattan Office Space Performance in Q2 2022
The volume of leases decreased in Q2 compared to last quarter by 3.9% as prices continued to increase. Demand also decreased along with volume in Q2, as it was at 7.32 million square feet for the quarter.
This level of demand was 10.1% lower than the five-year rolling average of 8.14 million square feet in Manhattan, while also being 10.6% lower than the ten-year average of 8.19 million square feet.
What are office space rents like in Manhattan?
Rent prices in Manhattan increased for the third consecutive quarter.
Q2 saw an increase of 0.7% which resulted in an average asking rent of about $75.61 per square foot.
This three-quarter increase also marked the longest streak of average asking rent increasing every quarter since 2019.
Shares of Leasing Activity in Manhattan in Q2 2022
The FIRE sector of tenants was the most active in terms of leasing in Q2, with a 47% share of leasing activity in Manhattan.
Behind the FIRE sector was the TAMI (Technology, Advertising, Media, and Information Services) sector, which has a 15% share of leasing activity.
The third largest share of activity belonged to the professional services sector, which had a 14% share of leasing activity.
Notable Office Space Deals in Manhattan in Q2 2022
Many notable office space deals took place in Q2 2022. These include:
- A renewal/expansion deal on 601 Lexington Avenue by Blackstone Inc. This property is 326,348 square feet.
- A renewal deal on 200 Fifth Avenue, a 287,393 square foot property, by Tiffany & Co.
- A new lease on 66 Hudson Boulevard (263,875 square feet) by HSBC.
- A new lease on 660 Fifth Avenue (221,764 square feet) by Macquarie Group Limited.
- A new lease on 2 Manhattan West (144,903 square feet) by Clifford Chance.
These are just a few among the many new leasing deals that took place in Manhattan in Q2 2022.
New Office Space Development Activity in Manhattan in Q2 2022
The availability rate in Q2 was 17.2%, which was just slightly lower than the previous quarter. Manhattan saw a record high availability rate of 17.4% back in February of 2022.
Q2 saw the sublet availability of Manhattan increase by 1.06 million square feet, now equaling a total number of 20.47 million square feet.
Sublets also represented just over 20% of the overall availability in Manhattan, signalling a shift away from direct rent and towards shared office spaces, a consequence of rising rents and low supply.
Market Forecast for Manhattan’s Office Space Market
It is very likely that asking rents in Manhattan could continue the current trend and increase in future quarters. Sublet asking rents also have a good chance of increasing next quarter as well.
Availability is hard to predict, as it was lower in Q2 than the previous quarter, while still representing a 72.2% increase since March 2020. It now appears that availability could be stabilizing somewhat as we exit the pandemic.