Market Overview
The end of the third quarter in the New York office market saw vacancy increase to 16.5% as users continue to reshuffle and rethink their space needs. Direct quarterly net absorption was down significantly to negative 758k square feet, improving on last quarters total of negative 1.94M. Firms continue to put sublease space on the market which added to total negative absorption to the tune of 805k square feet., compounding the year to date total to 5.3M square feet of move outs. The percent of workers in Manhattan returning to the office seems to have increased after Labor Day with 44% of them returning to the office according to Kastle Systems; this keeps the New York metro at 7th amongst the top ten metros.
Signs of a recovery took a continued to step backwards as more sublease space came onto the market. Sublease space on the market increase to 3.0% for class A & B space. However, leasing activity increased to just over 7.8M square feet in volume, this is an increase from the second quarter but still well below the 10 year quarterly average of 10.4M square feet. In addition to occupiers taking advantage of the dip in the market, they are looking for new class A, amenity rich buildings. New lease transactions in this product type have driven virtually all the new, large lease transactions in the second quarter.