Colliers International has revealed that about 42 million square feet of space was leased in Manhattan last year, up 13% from 2017 and the highest yearly lease volume since 2001.
Average asking for rent was about $76 per square foot, while CBRE’s data found that 2018 surpassed the average annual figure over the past decade by 26%.
Business and job growth and a strong economy are keeping the market healthy. Financial, insurance and real estate (FIRE) tenants took the city’s significant deals, along with coworking providers expanding their footprint rapidly.
WeWork takes up 7 million square feet of space in New York City, having surpassed JP Morgan as the city’s biggest private tenant. Knotel also has expanded into over 100 locations, many of which are in Manhattan. Coworking firms have changed the way landlords can avoid having business taken away from them.
In Q4, FIRE tenants made ten deals that took up 100,000 square feet of space.
“If we were talking at this point last year, I would’ve said it would be a good year, not the second-best in the century,” said Craig Caggiano, Colliers International Executive Director. “I would have thought rents would have remained stable. I would have thought availability may have been a little bit down, I definitely thought we would have been in negative absorption.”
Midtown had the most leasing success with 21 million square feet of space and four out of the five largest deals in Manhattan. Asking rent in the area hit an average of $83 per square feet. On the other hand, downtown saw the lowest levels of leasing activity at 6.32 million square feet.
Colliers Senior Managing Director Franklin Wallach said that leasing activity came from various industries, including Facebook, Google, and more.
Some brokers do not have an optimistic outlook. Savills Studley Vice Chairman Jeffrey Peck said that technology company leases and coworking growth is giving landlords an “artificial confidence level” due to availability seeming higher if these firms were not taking up so much space.
“If a landlord had a significant block of space that normally would have taken 18 months or 24 months to lease in a normal cycle, it’s getting leased much quicker, therefore giving the feeling that the market is much stronger than it actually is,” Peck said.
Transwestern found large blocks of space that are expected to enter the market next year and expects leasing activity to remain healthy, but is unsure if it will be equivalent to 2018’s success.
The Hudson Square area saw a drop in availability due to Google’s leases. Amazon’s Long Island City plans will also lead to increased demand in the area.
“It’s a great story and it’s exciting to see,” Newmark Knight Frank Senior Managing Director Eric Cagner said. “Going into 2019, you have to imagine that inventory to some extent … will remain tight. That does place some pressure on rents to remain where they are, if not push up slightly.”