Manhattan Office Report Q2 2019: Sales Drop 26% Y-o-Y, Trophy Office Rents Ask $94/Sq. Ft

Key Takeaways:

• Q2 office sales stop short of $2 billion; prices rest at $556 per square foot on average
• Class A+ asking rents increase 4% quarter-over-quarter; now average $94 per square foot
• NYC remains coworking capital of the U.S., with more than 16 million square feet of non-traditional office space
• Google makes largest Q2 office acquisition

Manhattan Office Market Slides to Lowest Price in 5 Years

Manhattan’s office market experienced a slowdown in Q2, with year-over-year sales volume dropping 26%, according to the latest report from COMMERCIALCafé. In fact, the nine office deals closed in Q2 amounted to just under $2 billion. Office assets that changed hands during the year’s second quarter encompassed 3.5 million square feet and averaged $556 per square foot. This was 37% lower than the same time last year, and marked the lowest quarterly average price per square foot in five years.

Overall, the average asking price for full-service rent for Manhattan office space was $75.60 per square foot in Q2. The most notable uptick in values was recorded for Class A+ office space, which saw a 4% increase compared to the closing of Q1; trophy space rents averaged $94 per square foot in Q2. Class A office space averaged $69 per square foot, while rents for Class B properties closed out at an average of $63 per square foot. Vacancy on the Manhattan office market was 7.5% at the end of Q2.

Manhattan Coworking Scene Remains Nationwide Leader

Coworking office space in Manhattan surpassed 16 million square feet in July 2019, reinforcing NYC’s leading position among U.S. markets for the highest coworking inventory, per the report. Although this represents barely 3% of total office inventory in the Manhattan market, it still allowed Manhattan to keep its leading position, which it’s held since 2012.

Two more office properties were added to the total inventory during Q2:

• The massive, 2.8-million-square-foot 30 Hudson Yards – the tallest tower in the pristine, new district.
• The 64,000-square-foot boutique office condominium at 100 East Broadway in Chinatown.

Office projects scheduled for completion during Q3 include 35 Hudson Yards, the Hudson Commons Expansion, Solar Carve Tower, and a medical center at 330 East 62nd Street.

Google Continues Manhattan Expansion Next to Chelsea HQ

Last year, Google dropped more than $2.4 billion to acquire the 1.1-million-square-foot Chelsea Market building. This May, the tech giant closed on the neighboring Milk Building, with the 325,000-square-foot Meatpacking District expansion costing just under $600 million. Coming in as the largest Q2 office sale on the Manhattan market, the deal worked out to $1,821 per square foot.

For a complete and detailed picture of the Manhattan office market in Q2, read the full report on COMMERCIALCafé.