- Manhattan office volume, an indicator of national investor sentiment, is showing signs of picking up.
- Through May, Manhattan accounted for just 3.7% of U.S. office volume, well below its historical average of 16.1%.
- June volume alone looks to nearly double for the year.
- Office fundamentals are stabilizing, with month-over-month availability declines, falling sublease space, and rising rents in numerous submarkets.
- Increased BOV activity and client inquiries suggest that investment volumes are set to rise.
In a June preview of what’s to come, Real Capital Analytics data shows that Manhattan is climbing back to its spot as the No. 1 office investment sales market in the country. Historically it is the clear-cut leader in the U.S., capturing an average of 16.1% of all office volume between 2001-19. This number fell to 8.1% in 2020 and is at just 3.7% through the first five months of this year. But closed and pending deals in June will nearly double volume through May. Manhattan’s June volume looks to be as much as 19% of the U.S. total for the month. This would bring first-half volume share to 5.8%. Other pending deals from earlier in the year will boost volumes even further.
The Manhattan office market is showing signs of stabilization and are the key to investor interest. Leasing volume was unchanged quarter-over-quarter, and while availability rose in Q2, it fell month-over-month for the first time since the start of the pandemic. In addition, sublet availability fell in Q2, and rents rose in 10 of Manhattan’s 18 submarkets. Meanwhile, the “Great Return” has begun across the country as office workers return to in-person work. This is just beginning, and a walk around Midtown Manhattan will show that there’s a long way to go in the city. That said, stabilizing office fundamentals are a harbinger of future investment sales.
Our team is seeing increased BOV activity, client inquiries, and hearing anecdotes of investors getting back into the game. Distress has been limited, preventing forced sales. Investors have understood that the softening of fundamentals due to the pandemic, while impactful, is temporary. As office workers return, so will sales. The largest metropolitan area in the country perpetually draws residents and job-seekers alike. We can debate the long-term impact of flexible and remote work, but New York’s position as a global gateway city is not at risk. Manhattan is getting set for a rebound, so investors seeking a piece of the Big Apple should start looking again.