NEW YORK, January 3, 2017 – At 33.10 MSF, Manhattan full-year leasing activity was 5.5% higher year-over-year, according to Colliers International. Leasing in 2016 not only bested 2015, it also surpassed full year leasing from eight of the last ten years. Only 2014’s 37.38 MSF and (narrowly) 2013’s 33.92 MSF topped leasing volume in 2016.

The FIRE (financial services, insurance and real estate) sector accounted for the largest share of Manhattan leasing in 2016 at 31% led by UBS’ renewal at 1285 Avenue of the Americas, Two Sigma Investments’ 217,000 SF renewal/expansion at 100 Avenue of the Americas and a total of 808,000 SF of new leases and expansions from WeWork throughout Manhattan.

Manhattan asking rents were up year-over-year. At an average $73.24/ SF, asking rents were 2.4% higher since year-end, 2015. Pricing was higher as against 2015 in Midtown, Midtown South and Downtown, in eleven of the 17 submarkets and in all three building classes.

Manhattan’s yearly availability rate was up 0.7pp (percentage points) to 10.3%. Large blocks of available space were added during the year, mostly as a result of new construction/major renovations and anticipated tenant relocations within Manhattan. Sublet availability was also higher for the year by 0.4pp to 1.8% but has remained at or below 2% for the last six years.

Net absorption was negative 3.79 MSF. This was the first full year of negative absorption since 2009 and seems modest in comparison. That year, with high sublet availability (3.3%) and anemic tenant demand resulting from the Great Recession, Manhattan absorption was negative 10.07 MSF. This past year, in part, the combination of strong leasing with negative absorption and higher availability was caused by several significantly sized deals closed with no impact on either availability or absorption: the four largest deals in 2016 were renewals or sale-leasebacks.

But, leasing demand in 2016 was also helped by job creation and low unemployment. Between November 2015 and November 2016, more than 61,000 new private sector jobs (a 1.6% increase) were added in New York City, higher than the 1.3% employment growth for New York State and on par with the 1.7% gain nationally during the same period. At 5.2%, New York City’s unemployment rate through November 2016 was stable over the last 12 months.

In the investment sales market, the average Manhattan sale price decreased by 11.3 percent; from $974/ SF in 2015 to $875/ SF in 2016. Despite weaker pricing overall, two markets witnessed significant capital appreciation – Downtown Class A and Midtown South Class B.

Downtown Class A prices reached $572/ SF, a 15 percent increase year-over-year, and a clear indicator of the long-term viability of the Downtown market where asking rents reached an all-time high in the fourth quarter of 2016. The TAMI (technology, advertising, media and information services) driven Midtown South Class B submarket continued to see values increase, reaching $775/ SF in 2016, thereby surpassing the 2016 Midtown Class B average of $774/ SF. This record high Class B pricing demonstrates the desirability of vintage assets in this high growth market.



YE 2015

3Q 2016

YE 2016

Availability Rate




Average Asking Rent ($/SF/YR)




Yearly Leasing Activity




Yearly Absorption




Joseph Harbert, President, Eastern Region for Colliers believes that, “we will continue to see strong leasing in 2017 but there will be significant pockets of opportunity for value-conscious tenants in the Manhattan market.”


Aside from 2015’s slightly higher 16.71 MSF, 2016’s 16.66 MSF was Midtown’s strongest full-year leasing since 2003. FIRE tenants leased 43% of all Midtown space in 2016, led by UBS’ 891,000 SF renewal at 1285 Avenue of the Americas and Citadel’s 211,000 SF lease at 425 Park Avenue.

Midtown’s asking rents were up 2.2% since 2015 to an average $82.39/ SF. Midtown rents were higher year-over-year in all three building classes and in four of Midtown’s five submarkets. While asking rents in Midtown have recovered an impressive 41.1% since Great Recession lows, they are still 10.5% under the record high average set in 3Q 2008.

Midtown’s availability rate increased 0.7pp in 2016 to 10.7%. Yearly absorption was negative 1.87 MSF. New Midtown inventory in 2016 included the still under renovation 390 Madison Avenue (844,000 SF), 1155 Avenue of the Americas (501,000 SF) and 605 Third Avenue (374,000 SF). At 1.9%, sublet availability ticked up in 2016 but has stayed at or below 2% for nearly two years.



YE 2015

3Q 2016

YE 2016

Availability Rate




Average Asking Rent ($/SF/YR)




Yearly Leasing Activity




Yearly Absorption





With the exception of 2014 (13.02 MSF), Midtown South had its best full year of leasing in a decade. At 11.28 MSF, leasing volume in 2016 was 7.1% greater than 2015. Google’s 264,000 SF deal at SuperPier and transactions by other TAMI companies comprised 34% of all Midtown South leasing in 2016.

Asking rents in Midtown South reached another all-time high in 2016. Rents were up 2.6% since 2015 to an average $67.81/ SF, a 17.7% discount to Midtown. In pre-Great Recession 1Q 2008, the discount was 30.1%. Asking rents were higher in Class A and C buildings as well as in four of Midtown South’s seven submarkets.

Midtown South’s availability rate increased by 1.4pp to 8.4% in 2016. Yearly absorption was negative 2.50 MSF. New construction at 512 West 22nd Street (164,000 SF), 412 West 15th Street (130,000 SF) and 540 West 26th Street (67,000 SF) contributed to 2016’s inventory. And, at 5 Manhattan West, two separate 250,000 SF plus blocks were listed. Midtown South sublet availability was up 0.6pp in 2016 to 1.9% with a large sublet from Tommy Hilfiger at 601 West 26th Street but sublease availability has been at or below 2% for the last seven years.



YE 2015

3Q 2016

YE 2016

Availability Rate




Average Asking Rent ($/SF/YR)




Yearly Leasing Activity




Yearly Absorption





Leasing activity Downtown jumped nearly 25%, year-over-year, to 5.15 MSF. Nonetheless, leasing Downtown was weaker in 2016 than it was in five of the last ten years. Leasing activity last year fell 11.6% below the ten-year rolling average, of 5.83 MSF. The TAMI sector outpaced leasing by traditionally dominant FIRE tenants. With McGraw-Hill Financial’s nearly one million square foot renewal at 55 Water Street (Manhattan’s largest lease in 2016), deals by TAMI companies represented 42% of all Downtown leasing in 2016.

Downtown ended 2016 with record high asking rents, up 2.4% since 2015 to an average $59.01/ SF. Fourth quarter, 2016 was the tenth consecutive quarter of rising asking rents and the longest period on record. Asking rents were higher, year-over-year, in all three building classes and in three of Downtown’s five submarkets.

Downtown was Manhattan’s only market with a yearly decrease in availability (0.3pp lower to 12.3%) and positive yearly absorption (0.58 MSF) with few large blocks listed in 2016. Downtown was also the only market with tighter sublet availability year-over-year, down 0.1pp to 1.3% for Manhattan’s lowest sublet availability rate.



YE 2015

3Q 2016

YE 2016

Availability Rate




Average Asking Rent ($/SF/YR)




Yearly Leasing Activity




Yearly Absorption





Total transactional volume reached $21.1 billion in 2016, the third highest level this decade. The majority of transactions involved Class A buildings; seven transactions occurred in excess of $1 billion. While demand for Manhattan office buildings remains strong, especially from foreign buyers who accounted for 45% of office purchases in 2016, investor underwriting has become more conservative as market sentiment seems to have peaked in 2015 after six years of booming economic growth and corresponding investment sale prices. The average Manhattan sale price decreased from $974/ SF in 2015 to $875/ SF in 2016, an 11.3% decline. Transactional activity also dropped considerably from 88 sale transactions in 2015 to 62 sale transactions in 2016.

Interest rates have increased with the 10- Year Treasury reaching 2.57% on December 27th, an increase of 94 basis points from the start of the fourth quarter and 69 basis points since Election Day. Rising interest rates coupled with a flattening of rental rates has had a detrimental impact on sale prices. A small pull back in prices is reasonable especially with 15.72 MSF of new/renovated office inventory scheduled to be delivered over the next several years. According to Scott Latham, Vice Chairman, Capital Markets, Colliers International, “Given the yield opportunity which now exists in the equity and bond market, 2017 may see a further uptick for investment sales as investors seeking to capitalize on the significant appreciation of their real estate assets may look to diversify their holdings.”

(Office sales over $15 million)






Total sales

$21.1 bil

$28.7 bil

$16.8 bil

$19.7 bil

$9.1 bil

Average sale price

$329 mil

$327 mil

$218 mil

$303 mil

$147 mil

Average price/sf






Additional highlights from Colliers International’s year-end 2016 Manhattan analysis:

  • Manhattan’s five largest leases in 2016 included: Renewals by McGraw-Hill Financial (900,000 SF at 55 Water Street), UBS (891,000 SF at 1285 Avenue of the Americas) and Penguin Random House (604,000 SF at 1745 Broadway), Coach’s 694,000 SF sale-leaseback at 10 Hudson Yards and NYU Langone Medical Center’s 390,000 SF new lease at 222 East 41st Street.
  • At 5.04 MSF in 2016, the Plaza District has led Manhattan’s 17 other submarkets in leasing every year for the past decade.
  • The average asking rent for sublet space in Manhattan was up 9.2% to $57.64/ SF, year-over-year.
  • Manhattan absorption in 2016 was negative 3.79 MSF. However, Manhattan’s overall 19.21 MSF of positive net absorption from 1Q 2010-4Q 2016 has eclipsed the 18.35 MSF of negative absorption caused by the Great Recession (4Q 2008-4Q 2009).
  • Pricing for Manhattan’s 12 contiguous blocks of space larger than 250,000 SF was higher in 2016 by 12.6% to $87.68/ SF, a 19.7% premium to market average compared to 8.9% one year ago.


1 Note: The availability rate is based on actively marketed space scheduled by ownership for tenant build-out within 12 months.
2 Source: New York State Department of Labor.
3 Note: Partial leasing of the blocks at 390 Madison Avenue and 605 Third Avenue occurred during 2016.

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