NEW YORK – January 13, 2016 – The Manhattan office market ended 2015 with an overall leasing velocity that was down from 2014 but still above the ten-year average, while asking rents increased for the 11th consecutive quarter and investment sales for office properties achieved near-record trading volume, according to new research from Colliers International. The year also revealed market role-reversals, with Downtown recording the largest annual drop in activity as Midtown posted its strongest leasing figures since 2003. 

At 31.4 msf, overall Manhattan leasing activity in 2015 was down 16.1 percent year-over-year from 37.4 msf, but still 8.4 percent above the ten-year historical average of 28.9 msf. The overall Manhattan availability rate of 9.6 percent was its lowest level since 2008, and the average asking rent of $71.50/sf was just 2.5 percent below the all-time high of $73.31/sf set during the third quarter of 2008. The FIRE sector accounted for the largest share of Manhattan leased square footage, at 36 percent.

MANHATTAN LEASING ACTIVITY (MSF)

 

Q4 ’15

Q3 ’15

Quarterly change

Q4 ’14

Annual change

Manhattan Overall

7.9

7.1

11.9%

8.5

-6.9%

Midtown

4.2

3.3

25.2%

4.0

3.7%

MTS

2.6

2.3

13.2%

2.9

-10.7%

Downtown

1.1

1.4

-21.7%

1.5

-27.4%

“The Manhattan office market posted another solid year in 2015 as New York is still the most in-demand city in the world among employees seeking a 24/7 live/work/play environment and international investors looking for safe, value-driven opportunities compared to other global markets,” said Joseph Harbert, Eastern Region President for Colliers International. “Leasing was down over the prior year, although average asking rents once again hit record highs and investment sales closed in on peak levels. There was also a Midtown resurgence at a time when Downtown cooled off. We anticipate another healthy year in 2016.”

MIDTOWN

Midtown had its strongest year in more than a decade, with 16.7 msf of leasing activity — a 12-year high. The FIRE sector had a near 50 percent share of Midtown leasing in 2015, while TAMI companies lagged at 20 percent. Availability dropped 70 basis points (bps) year-over-year, to 10 percent, while yearly net absorption was positive 1.95 msf, 62.8 percent stronger than 2014.

Meanwhile, Midtown’s average asking rent increased 7.8 percent year-over-year to $80.61/sf, its most significant annual increase since 2011 and the first time Midtown’s average asking rent crossed the $80/sf threshold since 2008.

MANHATTAN ABSORPTION (SF)

 

Q4 ’15

Q3 ’15

Q4 ’14

2015 total

2014 total

Manhattan Overall

526,530

2,259,024

1,131,226

4,254,297

8,441,565

Midtown

-906,762

1,073,908

-312,293

1,949,899

1,197,671

MTS

705,025

312,255

929,487

2,078,634

3,007,280

Downtown

728,267

872,861

514,032

225,764

4,236,614

MIDTOWN SOUTH

Leasing activity in Midtown South, at 10.5 msf, fell off 19.2 percent year-over-year. But leasing activity was 31.2 percent above the historical ten-year average of 8.0 msf and ranked as the second best year of Midtown South activity since 2006. TAMI tenants made up almost one-third of all 2015 Midtown South leasing activity.

At 7.0 percent Midtown South availability was 90 bps less than a year ago, resulting in the tightest market since the fourth quarter of 2007. And year-over-year the average Midtown South asking rent was up 7.4 percent, to $66.07/sf, a new all-time high. Increases occurred across all building classes, including Class B and C asking rents, which ended 2015 at record levels.

MANHATTAN AVAILABILITY RATES

 

Q4 ’15

Q3 ’15

Quarterly change
(bps)

Q4 ’14

Annual change (bps)

Manhattan Overall

9.6%

9.7%

-10

10.0%

-40

Midtown

10.0%

9.6%

-40

10.7%

-70

MTS

7.0%

7.4%

-40

7.9%

-90

Downtown

12.6%

13.3%

-70

11.7%

+90

DOWNTOWN

Offsetting some of the gains in Midtown, Downtown leasing activity for 2015 was 4.1 msf, down nearly 50 percent year-over-year. Downtown was also the only major Manhattan market to post a year-over-year increase in availability, up 90 bps, to 12.6 percent.

Despite these factors, Downtown’s average asking rent was up 10.3 percent to $57.63/sf, another all-time high, resulting in the largest year-over-year increase of all three Manhattan markets. With 2.1 msf leased, the Financial District supplanted the World Trade Center as the strongest performing Downtown submarket in 2015. And Tribeca, at $69.59/sf, replaced WTC as the most expensive Downtown submarket.

MANHATTAN AVERAGE ASKING RENTS (P/SF)

 

Q4 ’15

Q3 ’15

Quarterly change

Q4 ’14

Annual change

Manhattan Overall

$71.50

$70.25

1.8%

$66.52

7.5%

Midtown

$80.61

$79.57

1.3%

$74.78

7.8%

MTS

$66.07

$65.32

1.1%

$61.50

7.4%

Downtown

$57.63

$57.13

0.9%

$52.23

10.3%

CAPITAL MARKETS

Total Manhattan office sales volume for 2015 reached $27.3 billion, with record pricing of $996/sf, led by the $2.6 billion sale of 11 Madison Avenue, the largest office trade of the year. The average transaction size for office sales was $350 million, with foreign buyers accounting for 31 percent of all 2015 purchases, totaling approximately $8.3 billion. Direct foreign investment is expected to accelerate in 2016 due to changes in FIRPTA regulations.

MANHATTAN INVESTMENT SALES – OFFICE
(Tracks all office trades $15.0 million+)

 

2015

2014

2013

2012

2011

Total sales

$27.3 bil

$16.8 bil

$19.7 bil

$9.1 bil

$13.8 bil

Average sale price

$350 mil

$218 mil

$303 mil

$147 mil

$320 mil

Average price/sf

$996

$715

$769

$509

$565

 

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

  • Manhattan ended 2015 with average Class A asking rents of $75.49/sf, up 7.1 percent from $70.48/sf a year ago.
  • At $115.79/sf, Chelsea recorded the highest Class A asking rents among Manhattan’s 17 submarkets
  • The average 2015 Manhattan office property sale price/sf was up 39 percent year-over year ($996/sf vs $715/sf), and up 96 percent from the 2012 post-recession low ($509/sf).