At the end of March, Manhattan had 19.2 million square feet of office space under construction, according to CommercialEdge data. The development pipeline’s size hasn’t recorded significant changes year-over-year through the same month.
The under-construction stock represented 4 percent of the market’s total stock—also matching March 2021 levels.
In February, The Moinian Group started construction of the Hudson Arts Building in Chelsea, the only groundbreaking of a new office development during the first three months of the year. The 10-story tower is slated to comprise 200,000 square feet of office space.
Also in the first quarter of the year, excavation work began on the upcoming mixed-use tower at 520 Fifth Ave. in Midtown. Slated to offer luxury residences and boutique office space, the project is one of the few ground-up developments to have commenced construction in Manhattan since the beginning of 2021. Rabina Properties is behind the 450,000-square-foot tower, designed by Kohn Pedersen Fox.
Other notable events included the topping out of Brookfield Properties’ 2 million-square-foot Two Manhattan West tower, scheduled for completion in 2023.
Increasing office vacancy
The borough’s average listing rate in the third month of 2022 reached $74.2 per square foot, down 13.5 percent year-over-year. Vacancy hit 14.4 percent, up 370 basis points compared to the same period last year.
Manhattan’s occupancy has almost doubled since the beginning of the pandemic in March 2020, when it stood at 7.4 percent. At that time, the borough had the second lowest vacancy among all major markets, trailing San Francisco.
With the global health crisis rewriting standard working scenarios and office vacancy expanding in most U.S. markets during the past two years, several cities outperformed Manhattan in the first quarter of 2022. The national average vacancy rate reached 15.9 percent in March, up 30 basis points year-over-year. As of March, Boston (10.5 percent) had the lowest vacancy among gateway markets, followed by Miami (12.8 percent) and Los Angeles (13.7 percent).
Heightened leasing activity
March was eventful in terms of office leasing for Manhattan. Landlords inked up several significant commitments that month, including design house Hermès’ relocation to the Plaza District. The French luxury brand signed a 71,757-square-foot agreement with The Olayan Group at 550 Madison Ave.
Also in March, IBM made a significant commitment to Manhattan, when the company signed a 328,000-square-foot, 16-year lease at SL Green Realty Corp.’s One Madison Avenue. Additionally, not-for-profit MJHS Health System committed to 138,374 square feet at New Water Street Corp.’s 55 Water St. tower in Lower Manhattan, marking the largest lease for the submarket in the last 18 months.
Other notable leases signed in the first quarter of the year included streaming giant Roku’s 240,000-square-foot lease at RXR Realty’s 5 Times Square, as well as Signature Bank’s 15-year lease for 280,182 square feet at 1400 Broadway.