Despite Growing Economic Concerns, Manhattan Office Leasing Up 14 Percent in 2022

Despite Growing Economic Concerns, Manhattan Office Leasing Up 14 Percent in 2022

Commercial News » New York City Edition | By Michael Gerrity | January 18, 2023 8:58 AM ET

According to CBRE's Manhattan Figures Q4 2022 report, concerns over an economic recession affected Manhattan's office leasing market as tenants slowed decisions on their real estate requirements at year end. During the fourth quarter, office leasing totaled 4.42 million sq. ft., 27% below the five-year quarterly average of 6.01 million sq. ft.
Despite lackluster leasing activity during the quarter, Manhattan's 23.21 million sq. ft. of leasing for the year was 14% higher than the total posted in 2021. Renewals of 2.10 million sq. ft. during the quarter brought the yearly total to 5.96 million sq. ft. The market's Q4 availability rate rose 40 basis points (bps) from Q3 and 50 bps from a year ago. Average asking rent during the quarter was flat at $77.24 per sq. ft., but up 1% from year-end 2021.
"Manhattan's office leasing market was impacted during the last quarter by tenants' hesitancy to make long-term decisions in light of an expected national economic slowdown," said Michael Slattery, CBRE's Associate Field Research Director. "Despite this, Manhattan's year-to-date leasing activity was healthier than in 2021 when the pandemic was in full swing."
While the Midtown market's leasing activity of 2.57 million sq. ft. during Q4 was 30% behind its five-year quarterly average, full-year leasing of 14.81 million sq. ft. was up 15% from the total recorded in 2021. Despite strong year-over-year leasing, net absorption for 2022 was negative 1.68 million sq. sq. ft., while the availability rate climbed 70 bps to 18.3%. According to CBRE's report, average asking average rent of $83.31 per sq. ft. during Q4 was flat quarter-over-quarter and year-over-year.
Similar to the Midtown market, Midtown South's leasing activity of 1.06 million sq. ft. in Q4 was 16% behind the five-year average while the full-year total of 5.27 million sq. ft. was up 10%. The market posted negative net absorption of 998,000 sq. ft. for 2022 and the availability rate rose 110 bps to end the year at 19.2%. The average asking rent in Midtown South of $83.13 per sq. ft. was also flat from Q3, but up 6% year-over-year.
Following suit, the Downtown market saw weak leasing activity in the fourth quarter, down 25% from the five-year average. Full-year leasing of 3.13 million sq. ft. was up 12% from 2022. Strong positive absorption in Q4 brought the yearly total to positive 489,000 sq. ft. The availability rate decreased 60 bps to 21.9% a year-end. Downtown's average asking rent of $58.31 per sq. ft. was up 1% quarter-over-quarter but 2% lower than year-end 2022.

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