Savills Studley Releases Third Quarter 2016 New York City Office Market Report

International commercial real estate services company Savills Studley has just released its third quarter 2016 New York City office sector report, which indicates that leasing activity remains inconsistent throughout Manhattan and, as a result, landlords continue to escalate their tenant retention efforts.

Savills Studley Senior Managing Director Bill Montana commented, “Best in class new product and premiere Midtown buildings are maintaining steady demand. However, a significant amount of commodity space is available, with more coming. This is the soft spot in today’s market where the best deals can be found.”

Savills Studley Executive Vice President Daniel Horowitz said, “Many landlords in Midtown are escalating their tenant retention efforts. Some are boosting the value of build-out packages, others are showing flexibility on rent."

Additional highlights from the 2016 Q3 New York City Office Market Report include:

• Overall Manhattan leasing activity fell slightly from 8 million square feet to 7.6 million square feet in Q3. If leasing continues on the same pace set in the first three quarters of the year, leasing will barely exceed 30 million square feet by the end of 2016 – an increase from the 28.1 million square feet in 2015, but a far cry from the 35 million square feet averaged in 2013 and 2014
• As a result of the increased availability in the market, many owners are adjusting lease terms, retreating on asking rent, raising concessions on renewals and shorter term deals, and increasing the value of turnkey/build-out packages
• The dropoff in demand is particularly apparent in Manhattan’s most expensive submarket, the Plaza District. Class A availability in the Plaza District ballooned to 12.9 percent, an increase of more than 370 basis points from a year ago 
• Availability rates continued to rise. In Midtown, the class A availability rate jumped by 120 basis points from 11.1 percent to 12.3 percent, its highest mark in three years

Savills Studley’s third quarter 2016 office report predicts that the increase in firms opting for a short-term lease also reflects growing caution among Manhattan businesses. While there is no one specific threat looming over the market, many businesses question whether conditions are about as good as they can get.

The 2016 Q3 Savills Studley New York Office Market Report can be found on Savills Studley’s webpage, as well as a national report and reports for each of the 29 major U.S. markets.