Annual office leasing total is 63 percent higher than in 2020
According to CBRE's fourth-quarter and full-year figures for Manhattan's Midtown, Downtown and Midtown South markets, signs of an increasing office market recovery are in play.
CBRE reports leasing activity in the Manhattan office market totaled 8.19 million sq. ft. in Q4, 30% ahead of the five-year quarterly average of 6.27 million sq. ft. Full-year leasing activity of 20.42 million sq. ft. was up 63% compared with the same period last year but lagged the five-year average by 19%.
"Strong Q4 2021 leasing activity is another data point confirming that the office market is on a recovery path," said Nicole LaRusso, senior director of research and analysis for CBRE Northeast. "Even as the omicron wave has delayed short-term plans for return-to-the-office, occupiers continue to make long-term commitments to new space."
The Manhattan availability rate rose 10 basis points (bps) from Q3 2021 to 18.7% and was up 330 bps from a year ago. Net absorption was negative 736,000 sq. ft. in Q4, bringing the year-to-date total to negative 15.74 million sq. ft.
According to the CBRE report, Midtown experienced 5.54 million sq. ft. of leasing in Q4, an increase of 288% from Q4 2020 and 44% above the five-year quarterly average. Annual leasing in Midtown was 12.85 million sq. ft., 46% ahead of 2020's total, but 17% behind the five-year annual average. As a result of the robust leasing activity, Midtown's availability rate dropped to 17.6% from Q3. At $83.45 per sq. ft., Midtown's average asking rent was up 2% both quarter-over-quarter and year-over-year.
The Downtown office market also showed signs of a rebound, with average asking rents increasing 2% from the previous quarter to $59.62 per sq. ft. Leasing activity totaled 969,000 sq. ft. during Q4, up 864% from Q4 2020 but 17% behind the five-year quarterly average. This pushed annual leasing activity to 2.78 million sq. ft., up 24% from 2020, but still 40% below the five-year annual average.
Leasing activity in Midtown South totaled 1.68 million sq. ft. in Q4 2021, a 738% increase from Q4 2020 and 34% ahead of the five-year quarterly average. Annual leasing activity for 2021 increased to 4.79 million sq. ft., up 222% from 2020, but still 4% below the five-year annual average. The average asking rent was virtually unchanged from the prior quarter at $78.56 per sq. ft. but was down 2% year-over-year.
"The market has a lot of excess supply to wrestle with," said LaRusso. "That said, we're seeing strong demand for the higher quality office assets, and we expect availability to decrease in the better segments of the market in 2022".