Overall rental prices were down while space availability rose in Manhattan in the second quarter, according to Savills Research’s Market in Minutes report.
Uncertainty from COVID-19 pandemic has led to a pause in real estate decisions for many businesses, but availability still rose to 11.8 percent. About 163,000 square feet of space at 55 Water Street and 151,000 square feet of space at 410 Tenth Avenue were available from Emblem Health and First Republic Bank, respectively. About a quarter of available space are now subleases, which is still lower than the average 44 percent of subleases account for total available space in the last two market downturns.
For Class A rentals, the asking rental rate has gone up from $92.83 to $95.32 since last year, with the Class A Taking rental rate staying about the same, only going less than a dollar from $84.91 in 2019 to $84.39. Quarterly leasing activity was down in the second quarter 2020 compared to the second quarter in 2019, from 11.6 MSF to 3.3 MSF. However, inventory and availability has gone up, with 11.8 percent availability in the second quarter.
In Manhattan, 34.4 percent of the top transactions by square footage were made by financial services tenants, while 44.4 percent of major transactions occurred in Times Quarter. Of the top 10 transactions, six were renewals. In terms of availability, Plaza North had the highest availability at 18.4 percent whereas Hudson Yards had the lowest at 5.4 percent.
The current conditions may favor tenants with strong credit and allow them to pursue discounted rent and concession packages. Presently, landlords are standing firm on asking price with rents down only 1.3 percent since the first quarter at $82.86 per square foot. However, uncertainty from COVID-19 may end, which will lead to tenants leveraging space opportunities and sublease pricing in late 2020 and 2021. Organizations looking for cost-saving measures will be bolstered by the increase in sublease space in negotiations with landlords.