Concessions Take Center Stage in Manhattan Office Leasing

Although falling below the peaks of 2022, concessions are not likely to disappear anytime soon; and are currently outpacing rising rent prices. However, despite the heavy concessions at higher-quality Class A buildings that can bring the net effective rent below $100 per square foot, it is still higher than what the tenant would pay at a Class B or Class C space. Among lease deals for at least 25,000 square feet, 10-year terms, and triple-digit asking rents during the 1st quarter of 2023, an average tenant landed a 16-month rent concession on their leases, down only one month from the 2022 peak, representing a 23% increase over the 13-month pre-pandemic average. Tenant improvement allowances have similarly risen from the $104 per square foot pre-pandemic average to $145 per square foot in the 1st quarter — a moderate lowering from the peak average of $147 per square foot in 2022.