NEW YORK – July 14, 2015 – The overall Manhattan office market recorded another solid quarter, with significant positive absorption, increasing asking rents, a decline in availability, and continued health in the FIRE sector, according to new research from Colliers International. And while leasing activity slowed somewhat from the previous quarter, it remained above the rolling ten-year average for the seventh consecutive quarter.

Overall leasing activity for the second quarter of 2015 was 8.1 million sf — down 2.8 percent from approximately 8.3 million sf in the first quarter — and 8.0 percent below the 8.8 million sf a year ago. Meanwhile, the overall Manhattan availability rate was 10.1 percent, down 0.6 percentage points (pp) from 10.7 percent in the first quarter, and down 0.9 pp from 11.0 percent a year ago.

Absorption was the big story this quarter, which, at positive 2.9 million sf, is significantly higher than the negative 1.4 million sf recorded last quarter and positive 1.9 million sf a year ago. The rise in second quarter absorption was driven primarily by significantly sized blocks in Midtown and Midtown South being withdrawn from the market or leased (including 289,000 sf at 7 Bryant Park, 255,000 sf at 919 Third Avenue, and 148,000 sf at 855 Avenue of the Americas).

Further, the overall Manhattan asking rent rose for the ninth consecutive quarter. At $68.47/sf it was 1.3 percent higher than the $67.62/sf last quarter and 6.2 percent above the $64.46/sf achieved a year ago.

“Manhattan is operating from an inherent position of strength and stability,” said Joseph Harbert, Eastern Region President for Colliers International. “Asking rents continue to set records, availability rates are still declining, and investor appetite for properties is as healthy as ever. We anticipate more of the same for at least the rest of the year. There are no signs of a bubble.”


Midtown registered 4.31 million sf of leasing in the second quarter, down 12.3 percent from the 4.91 million sf in the first quarter, but up 0.6 percent from the 4.28 million sf a year ago. However, absorption was a robust positive 2.2 million sf, up considerably from the negative 425,710 sf the previous quarter and positive 902,866 sf a year ago.

Contributing to the 2.2 million sf — the strongest quarter of positive absorption on record — were leases signed for greater than 100,000 sf at 919 Third Avenue and 1301 Avenue of the Americas, as well as the 289,000 sf withdrawn from the market at 7 Bryant Park. 
Midtown also saw average asking rents rise to $77.93/sf, up 2.3 percent from the $76.15/sf in the first quarter and up 4.9 percent from $74.29 sf a year ago. At $80.23/sf, the Class A average rose 2.7 percent, up from $78.12/sf the previous quarter, while crossing the $80.00/sf threshold for the first time since 2008.


The scorching Midtown South market showed no signs of slowing down. Leasing activity was 3.0 million sf, up 14.3 percent from 2.6 million sf recorded last quarter and up 34.0 percent from 2.2 million sf a year ago. Meanwhile, the overall asking rent hit another all-time high, breaking the record set just last quarter and marking the 18th consecutive quarterly increase.

Rents reached $64.26/sf, up 3.6 percent from $62.02/sf last quarter and up 13.8 percent $56.47/sf from a year ago. Newly listed blocks of space with above-average asking rents and repricing of existing blocks contributed to the increase (including at 10 Hudson Yards, 112 West 34th Street, and 350 Fifth Avenue).

Midtown South also recorded 0.2 million sf of positive absorption, and although it was down 75.9 percent from the 855,444 sf of positive absorption in the first quarter, it was a noticeable reversal from the negative 162,903 sf a year ago and both the fourth consecutive quarter of positive absorption and the longest continued period of positive absorption since 2010-2011. The availability rate was 7.6 percent, down 0.1 pp from 7.7 percent the previous quarter, making it the tightest Manhattan market, and down 1.3 pp from 8.9 percent a year ago.


The Downtown market continued its bifurcated trend. The availability rate decreased 0.5 pp to 14.1 percent, down from 14.6 percent last quarter, influenced by 42 new leases for new or expansion space, and a lack of large blocks of newly listed space.

In addition, the average asking rent was $55.07/sf, and though just a slight increase from $55.00/sf achieved the previous quarter, it was still another all-time high for Downtown. Again, these levels are predominantly a result of the repricing of existing inventory and new blocks of space with above average asking rents (such as 17 Laight Street, 1 Liberty Plaza, and 32 Old Slip). 

Meanwhile, leasing activity was 803,056 sf, down just 0.4 percent from the previous quarter’s 806,668 sf, and nearly a third less than the 2.3 million sf recorded a year ago. This was the first time since 2009 that leasing velocity fell below 1 million sf in back-to-back quarters. And although Downtown registered 480,000 sf of second quarter positive absorption, Downtown absorption is still negative 1.38 million sf year-to-date.


Core buildings continue to dominate sales activity, with 35 transactions totaling $12.5 billion in transactions year-to-date, pushing pricing to record levels. In fact, Class A buildings in Midtown South ($1,402/sf) are trading at nearly the same price as Class A buildings in Midtown ($1,521/sf). Class A Downtown properties have averaged $497/sf year-to-date, with the overall average Manhattan Class A office property trading at $1,178/sf.

Class B property trades have averaged $559/sf year-to-date, with the overall Manhattan office building trading at $985/sf. Foreign buyers have accounted for more than $5 billion in sales transactions, nearly half of the 2015 volume.

Additional highlights from Colliers International’s 2015 second quarter Manhattan analysis:

  • The FIRE sector accounted for 38 percent of total second quarter office leasing, evidence of a strong rebound for this sector.
  • The five largest second quarter Manhattan office leases included: Skadden, Arps (545,009 sf at 1 Manhattan West); Morgan Stanley (414,759-sf renewal at 750 Seventh Avenue); Bloomberg L.P. (254,556 sf at 919 Third Avenue); TD Bank (200,000 sf at One Vanderbilt); and WeWork (178,221 sf at 1460 Broadway).
  • Penn Plaza/Garment District accounted for 57.5 percent of Midtown South office leasing;  Penn Plaza/Garment District also registered the strongest leasing velocity of all 17 Manhattan submarkets.
  • FiDi accounted for 54.8 percent of all Downtown leasing; that submarket’s availability also decreased 1.3pp to 13.3 percent, the largest pp quarter-over-quarter drop in second quarter Downtown availability.