PRESS RELEASE: Manhattan office leasing volume in 2020 declines by 51.0 percent to record low

Vacancy rate rises dramatically to 14.2 percent; asking rates fall

New York, NY – Manhattan office leasing volume in 2020 declined by 51.0 percent year-over-year to 19.4 million square feet, down from the previous record low of 25.0 million square feet set in 2008, according to Avison Young’s Fourth Quarter 2020 New York City Office Leasing Report.

“In typical fashion associated with a U.S. Presidential election year, and this time exacerbated by the COVID-19 global pandemic, the Manhattan office leasing market experienced volume declines, setting new record lows in 2020,” said Marisha Clinton, Avison Young’s Senior Director of Research, Tri-State.

There were 29 large block transactions in excess of 100,000 square feet in Manhattan in 2020, including Facebook’s 730,000-square-foot new lease at 390 Ninth Avenue and NYU Langone Medical Center’s 633,000-squarefoot extension at One Park Avenue, compared to 63 large block transactions in 2019. Renewals and subleases across various sized occupiers together made up 25.0 percent of total leasing activity in 2020, up modestly from the previous year, while expansion transactions declined, making up only 2.0 percent of total leasing compared to 11.0 percent in 2019.

At the end of the fourth quarter, the record high Manhattan overall office vacancy rate came in at 14.2 percent, up 420 basis points from 10.0 percent a year ago. Record high vacancy rates were also reached in Midtown (14.2 percent), Midtown South (14.8 percent) and Downtown (13.6 percent).

“We attribute the overall increase in the vacancy rate not only to direct space on the market (the largest block being in excess of 850,000 square feet at 3 Times Square), but also to the availability of additional discounted sublet space,” Clinton said.

The Manhattan office market ended 2020 with 19.0 million square feet of sublet vacant space. Since March 1, just over 7.3 million square feet of sublet space has been added, which includes 2.0 million square feet added in the fourth quarter.

Clinton continued, “The 19.0 million square feet of sublet vacant space now represents 29.0 percent of total vacant space available. At this percentage level, we see the impact on direct average asking rents and downward pressure on overall pricing.”

Manhattan overall average asking rents ended the fourth quarter at $77.00 per square foot, down 6.0 percent year over-year. Comparing the current average asking rents to the end of 1Q 2020 (after the start of the COVID-19 shutdown), the declines range from 2.0 to 9.0 percent.

“Due to additional competitive lower-priced sublet space on the market, with more to come, over time we can expect to see further decreases in average asking rents as well as continued increases in vacancy rates,” Clinton said.