Despite a slowdown in activity related to the city’s shutdown during the COVID-19 pandemic, downtown office space availability dropped to a historic low in the first quarter of 2020, according to Newmark Knight Frank’s quarterly office market reports. However, that likely is due in part to new space coming on line in Midtown South.
Downtown leasing activity dropped 67.3% from the last quarter of 2019 to 1.2 million square feet, said NKF’s Downtown Office Market 1Q2020 report. With the lack of new construction and absorption of trophy space in the World Trade Center, the neighborhood’s average asking rent declined from the previous quarter to $64.18 per square foot. However, the rate is an increase year-over-year from $63.60 per square foot.
The largest office market in the United States, Midtown Manhattan was one of the hardest-hit regions by the COVID-19 pandemic. Prior to the early March onset of the pandemic in New York, the first quarter was seeing rising asking rents, declining availability and leasing on par with historical levels, NKF reports.
By the end of the quarter, though availability remained essentially flat and asking rent rose year-over-year, Midtown leasing activity fell to its lowest first-quarter total since 2012, with 4.1 million square feet leased. Output was down 47.9% year-over-year and 64.7% below the 10-year historical average. January and February accounted for 81.7% of the leasing activity for the quarter.
Not far away, the strong momentum of Midtown South was brought to a “standstill,” NKF said. Availability increased for the third straight quarter to 9.9%, up 60 basis points quarter over quarter, largely because of the Flatiron Building and new construction becoming available. Asking rents reached a record high of $86.35 per square foot, topping Midtown for the first time, which averaged $86.28 per square foot. Approximately 2.9 million square feet are under construction in the area, with an additional three million square feet in the pipeline.
“In 2019, Midtown South activity reached its highest level in four year[s], propelled by a surge in TAMI deals,” the report said. “By the end of this first quarter, leasing activity stalled to the lowest quarterly levels since the third quarter of 2016.”
