At the midpoint of 2022, the New York office market saw vacancy increase to 16.0% and rental rates increase 1.8% from the prior year. Direct quarterly net absorption was up to its highest level since the start of the pandemic with 1.35M square feet of move in. However, firms continue to put sublease space on the market which turned total quarterly net absorption negative (316,823 sq ft), compounding the 12-month trailing total to 3.3M sq ft of move outs. The percent of workers in Manhattan returning to the office seems to have topped out at 38% according to Kastle Systems; this keeps the New York metro at 7th amongst the top ten metros. These figures may improve in the fall as children return to school and summer vacations come to an end.
Signs of a recovery took a step back as more sublease space came onto the market. Sublease space on the market increase to over 4.2% for class A & B space. However, leasing activity increased to just over 7.8M sq ft in volume, this is a drop off from the second quarter of 2021 and still well below the 10 year quarterly average of 10.4M sq ft. 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.
Signs of a recovery took a step back as more sublease space came onto the market. Sublease space on the market increase to over 4.2% for class A & B space. However, leasing activity increased to just over 7.8M sq ft in volume, this is a drop off from the second quarter of 2021 and still well below the 10 year quarterly average of 10.4M sq ft. 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.