Lease deals over 100,000 s/f propelled Manhattan’s office market to its strongest quarter this year.
According to Cushman & Wakefield’s latest office market report, leases in Manhattan reached 8.1 million s/f during the third quarter, the highest in the borough so far this year. This was mostly due to eleven deals over 100,000 s/f, which accounted for 34.4 percent of the total for the quarter.
The largest transaction during the quarter involved 1199SEIU Healthcare Workers East and Retirement Fund, which signed a 577,541 s/f lease at 498 Seventh Avenue. This was followed by New York Presbyterian Hospital’s 479,016 s/f at 237 Park Avenue and Amazon’s 359,471 s/f at Five Manhattan West.
The strong third quarter continues a winning streak for the borough’s office market. It stands as the third consecutive quarter with more than 7.5 million s/f in new leases, exceeding the borough’s historical quarterly average of 6.3 million s/f.
So far this year, the Manhattan office market has accounted for 23.5 million s/f in leases. The figure represents a 14.4 percent jump from the same time last year.
The increase in leases coincided with a modest drop in the borough’s vacancy rate. Manhattan’s vacancy rate decreased from 9.1 percent to 9.0 percent on a year-on-year basis. The figure stands as the borough’s lowest this year after two consecutive quarters of space additions.
A large portion of the deals that closed in Manhattan were within the boundaries of Midtown. During the quarter, the submarket accounted for 5.3 million s/f in leases, which amounts to 65.4 percent of all the leasing activity in the borough. The increase was mostly due to activity in Penn Station and Times Square South, which registered five deals above 100,000 s/f.
So far this year, leasing activity in the area has amounted to 14.9 million s/f, an 8.9 percent jump from the same time last year. This was partly due to a recovery in lease renewals. After two quarter of declines, the segment bounced back with 1.1 million s/f in deals. More than half of the renewal activity in the area came from just two companies: Estee Lauder and Morgan Stanley. During the quarter, Estee Lauder renewed for a total of 393,386 s/f at 767 Fifth Avenue and 110 East 59th Street. Meanwhile, Morgan Stanley signed a 227,552 s/f renewal at 1221 Avenue of the Americas.
Cushman & Wakefield expects the flow of large deals to continue. The firm said that pending transactions “will sustain the upward momentum of the first three quarters.”The company also predicts that vacancy rates will remain steady due to steady job growth in the financial services sector.