The rise in supply is simply outpacing demand.
Manhattan’s office availability set another unfortunate record at 15.5 percent in February, up 0.6 percentage points from January and 5.6 points from a year ago, according to Colliers International’s monthly market snapshot.
Total space leased in February was 900,000 square feet, down by 51 percent from the volume in January and by 57 percent from a year ago. The total was also 43 percent lower than the 2020 monthly average volume of 1.58 million square feet.
Net sublet availability rose by 1.14 million square feet last month, bringing sublet availability to nearly 20 million square feet, or about 24.3 percent of total availability.
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The biggest February lease signing was a 132,094-square-foot renewal by law firm Seyfarth Shay at the New York Times tower, 620 Eighth Avenue, followed by a new 120,809-square-foot lease by Jennison Associates at Fisher Brothers’ Park Avenue Plaza at 55 East 52nd Street. Third was LIM College’s 60,000-square-foot renewal at 216 East 45th Street, owned by Bernstein Real Estate.
Coming in fourth and fifth were fuboTV’s 54,786-square-foot lease and G/O Media’s 52,258-square-foot sublease, both at Vornado Realty Trust’s 43-story office tower at 1290 Sixth Avenue.
In a typical year, some 15 million to 20 million square feet of office leases expire, and tenants start making plans as their expiration date approaches, said Franklin Wallach, Colliers’ senior managing director for New York research.
But future office needs became uncertain as working from home became the norm, and many office tenants opted for a short-term lease extension or postponed decisions altogether.
Signs of recovery, notably vaccine distribution, are reassuring tenants that things are heading in the right direction.
“As there’s more clarity in the air, they would be more likely to — instead of a short-term solution because of not being sure of what’s taking place — re-engage the market,” Wallach said.
But demand is likely to be outpaced by supply in the near future because a big chunk of new office space is scheduled to be added to Manhattan inventory: 1.5 million square feet at Brookfield’s 2 Manhattan West and 1.3 million square feet at Tishman Speyer’s Spiral, both in the Hudson Yards neighborhood, Wallach said, citing CoStar.