While Manhattan Gasps, Brooklyn Bloats With Full Offices
Downtown Brooklyn appears to have taken the wind out of Manhattan’s sails when it comes to filling its office space.
Blame it on co-working spaces or working from home. Whatever the reason, Manhattan office space is gasping for tenants and landlords are growing increasingly desperate to get them. The NY Post reported recently that a tenant looking for a 4000-square-foot space in Midtown was bombarded by landlord’s offering ever sweeter deals.
“They fought over the tenant,” Nicholas Gilman Executive V.P. of Byrnam Wood said. “They wouldn’t stop calling.” A final deal provided brand new temporary space while a new space was being built to suit along with five months free rent, which works out about a month per year off of the lease. The final rent was $7 per square foot lower than the initial offer.
“It really reflects a change in psychology,” Gilman says. “It’s a strange and stark contrast to six months ago when you couldn’t get a call back.”
The net result has been a growing amount of available space, with people working in denser quarters and others working remotely. The recent construction boom is only going to exacerbate the issue, with 24 million square feet coming to the market over the next five years according to SL Green Realty.
Developer Tishman Speyer’s 620,000 square-foot office tower on top of the Macey’s department store in Downtown Brooklyn is part of a massive surge of office buildings in the area which are competing directly with Manhattan for tenants.
“I see three factors at play,” said Paul Travis, a developer and the managing partner at Washington Square Partners. “We are offering quality office space at a lower price point than Manhattan; there are tax incentives available for companies that come to Brooklyn; and, last but not least, the fact is that Brooklyn is where the talent pool is located.”
In total, Downtown Brooklyn has 17 million square feet of office space, and the new office construction is expected to add two million to three million square feet, according to the Downtown Brooklyn Partnership. The vacancy rate is tight 3.1 percent.
“We get calls from companies wanting to move to Downtown Brooklyn, but with the lowest commercial vacancy rate in the city, there is nothing available,” said Regina Myer, the president of the Downtown Brooklyn Partnership. “We are losing these jobs to other neighborhoods and even cities outside of New York, so having this new Class A office space is critical.”
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