NEW YORK CITY, New York: In the third quarter, New York City's office leasing market rebounded from one year earlier, but remained below levels seen before the COVID-19 pandemic.
Higher interest rates and a strong U.S. dollar are also discouraging new investment in the leasing sector.
According to Colliers International Group, office leasing volume rose 27.6 percent to 9.23 million square feet, the highest quarterly increase since the end of 2019.
Leasing volume totals 24.17 million square feet so far this year, some 50 percent more than the same period in 2021 and less than 4 percent from passing last year's total. In the five years through 2019, volume remained below the quarterly average of some 9.1 million square feet.
"We are still hearing of large pending deals," said Frank Wallach, executive managing director of New York research at Colliers, adding that leases usually close by year's end, as reported by Reuters.
Colliers added that the availability rate for office space dropped 0.8 percentage points to 16.4 percent in the third quarter, the sharpest quarterly decrease in eight years.
This decline means that availability is at its tightest since March 2021, but still far higher than 10.2 percent in the first quarter of 2020 at the start of the pandemic, Wallach said.
The leasing surge was driven by several large leases in the Hudson Yards district overlooking the Hudson River, including a 456,000 square foot deal by KPMG in August, the largest so far this year.
Data from commercial real estate platform "View The Space" on potential future leases for New York office space released last week highlighted a 22.8 percent decline in August for new leasing demand.
VTS said it expects leasing activity to be "pretty good" for coming months, but if there is no new demand by year's end, leasing can be expected to decelerate in 2023.