Manhattan’s Supply of Office Space Climbs to Another Record

(Bloomberg) -- Even as Manhattan's workers trickle back to their desks, the supply of available office space continues to set records.

The availability rate reached 18% in the second quarter, the highest in data going back three decades, according to Savills. Leasing ticked up in the period, but with more than 86 million square feet (8 million square meters) up for grabs, the recovery will be slow.

“With new supply continuing to grow and availability edging closer to 20%, it is unlikely that the market will see a rebalance of supply-demand until late 2022 or beyond,” the brokerage said in a report released Thursday.

Landlords added 7 million square feet to the market in the quarter, Savills said. By contrast, the amount of space listed by tenants for subleasing declined for the first time since the pandemic started last March, as dozens of companies pulled offices back for their own use.

New York's employers are increasingly urging a return to the office as the city relaxes pandemic restrictions. The share of metro area workers who were back at their desks as of June 23 was 21%, Kastle Systems data show.

More companies are also looking for space. Leasing in the quarter totaled 4.9 million square feet, the most since the beginning of the pandemic, according to Savills. Still, that's below the five-year quarterly average of 8.5 million square feet.

Asking rents fell 8.8% from a year earlier to $75.60 a square foot, the brokerage said. The value of concessions, such as free rent and tenant improvement allowances, is up 17% from the start of 2020 for long-term leases in Class A buildings.