NEW YORK CITY—Office leasing activity in the third quarter of this year rose more than 10% and reached the highest volume in the last four years. The strong overall commercial office market in Manhattan led to a new quarterly record price per-square-foot at nearly $75.86.
Third quarter leasing activity was 25.4% above Manhattan’s five-year historical average and a sizable 48.5% above its 10-year average, according to a report released by commercial brokerage firm Colliers International.
Leasing improved by 20.1% from the third quarter of 2017. The FIRE (financial services, insurance and real estate) sector registered a 53% market share in the third quarter of 2018.
A deeper dive into the third quarter stats shows that co-working firms are a definite force in the market, accounting for slightly more than one-fourth of all FIRE tenant deals (15% of Manhattan’s total leasing volume) in the third quarter. Leasing by the health services industry followed at 13%.
“This year is shaping up to be one of the strongest in recent memory in terms of Manhattan’s leasing performance, thanks to continued job growth and a healthy economy,” says David Amsterdam, president – investments, leasing & eastern region for Colliers International. “Co-working companies continue to amass significant office space as asking rents remained at a record-high while supply and absorption remained stable. While trading volume remained below the historic average, large assets like 4 Hudson Square and Terminal Stores dominated the New York investment sales market.”
Job growth remains strong, according to statistics from the New York State Department of Labor. From August 2017 to August 2018, New York City added 74,200 new private sector jobs, a 1.9% yearly increase. New York City bested annual employment growth for New York State (at 1.5%) and matched national private sector growth (at 1.9%). Unemployment in New York City (as of August 2018) was down 0.8 percentage points year-over-year, but 0.9 percentage points above the historic low of 3.4% from May 2018.
Manhattan’s asking rent average increased for the third consecutive quarter to $75.86-a-square-foot, a new quarterly record. Asking rents gained 2.3% since June 2018, the largest quarterly increase in three years. The average was up 4.1% since the third quarter of last year. Pricing was higher in eight of Manhattan’s 18 submarkets, quarter-over-quarter, the Colliers report states.