Manhattan Office Market Rebounding in 2017
Market Driven by Large Office Transactions
According to CBRE's Manhattan's office market has rebounded in 2017 from the slowdown of 2016 -- suggesting that market conditions remain stronger than some might have imagined at the end of last year.
"Growth in office-using employment has picked up steam this year, with nearly 44,000 jobs added in the first half of 2017," said Nicole LaRusso, Director, Research and Analysis, CBRE Tri-State. "Financial services and legal services both showed notable growth in employment following declines in each sector in 2016."
Buoyed by large transactions in the financial services and government sectors, leasing activity also expanded in the first half of 2017, outpacing 2016's mid-year leasing activity by 19%. Asking rents continued a trajectory of modest growth, though tenant improvement allowances have grown at a far faster rate, suggesting tenants are paying lower net effective rent; meanwhile, the number of upward repricings on existing listings fell off considerably in H1 2017, while downward repricings continue unabated from last year.
Despite the increase in both leasing activity and velocity in H1 2017, Manhattan continues to see negative net absorption this year, largely due to the delivery of new office product in Midtown South and Downtown. This has pushed up the availability rate to 12.0%--suggesting increasingly tenant-favorable conditions in the market.