Manhattan Office Market Rides Summer Swell

Manhattan office landlords are likely bummed to put their beach towels away after a strong quarter of activity in the market.

Tenants signed deals for 23.1 million square feet in the third quarter, a 25.1 percent jump year-over-year, according to Avison Young’s third-quarter data reported by the Commercial Observer.

The best news for landlords may be the declining vacancy rate, which dropped to 18.7 percent in the third quarter — the first time the quarterly rate fell below 19 percent since the first quarter of 2021. Direct available space fell 5.5 percent from the second quarter and sublet space available declined 2 percent.

“The activity across the New York City market suggests that there is cause for confidence as we turn the corner and enter 2025,” Avison Young’s Rory Murphy told the Observer.

The summer brought out more tenants willing to bake in the heat from large leases. There were 25 deals of at least 100,000 square feet in the third quarter, a jump from 18 in last year’s third quarter. Blackstone led the way with its 1-million-square-foot renewal and expansion at 345 Park Avenue.

The flight-to-quality trend continued in Manhattan. More than 75 percent of leasing activity so far this year has unfolded at either Trophy or Class A office properties, showing offices if they are new or feature enough bells and whistles are reeling in companies aiming to make the commute worthwhile to employees.

And people were commuting. Office buildings were 73.4 percent as busy as they were five years ago, according to cell phone tracking data, well above the national average.

As the weather gets chillier and the skies become more overcast, there are ominous signs on the horizon for Manhattan’s office bounceback. There are major lease expirations on the horizon, Avison Young’s report cautioned. Banking, finance, insurance and real estate tenants make up more than 40 percent of the 42 million square feet of expiring leases from 2025 to 2030.

— Holden Walter-Warner