LATEST NEWS

Manhattan Office Leasing Hits Seven-Year Low

Commercial office leasing in Midtown has plummeted due to competition from elsewhere and political turmoil.

By Jeff Vasishta January 5, 2017

It seems, in all walks of life, shiny, new and sexy wins over revered, old and established. NYC office space is no exception.

The commercial building bonanza currently sweeping across parts of Manhattan resulted in more than 871,000 square feet leased last year in the sparkling new Hudson Yards district, still being completed on the far West Side, reported the Wall Street Journal. However, about 34 percent of new space committed in Hudson Yards so far will be occupied by tenants relocating from Midtown sub-markets. Throw in the political and economic turmoil caused by an election year, and 2016 represented the weakest year for office leasing in Manhattan since 2009, according to preliminary statistics from real estate services firm JLL.

Specifically, JLL reported that 27.3 million square feet of new leases and renewals were signed in 2016—the lowest since 2009’s 24.4 million.

“Clients would come to us and say, ‘If I don’t have to make a decision now, why not wait?’” said Tristan Ashby, director of JLL’s New York research.

RelatedSpace Age Campus Designs For The Tech Big-Wigs Are Transforming The Concept Of Office Space

Although all traditional sub-markets in Manhattan were hit, particularly effected was the venerable upper-tier office market in Midtown, with vacancies up to 11.8 percent from 10.4 percent the previous year. Tenants traded staid for the newly made or made-over. Major League Baseball signed a 400,000-square-foot lease at 1271 Avenue of the Americas, a skyscraper undergoing a large-scale makeover, said the Journal. Law firm Hogan Lovells completed a lease for more than 200,000 square feet at 390 Madison Avenue, which is undergoing a redevelopment by L&L Holding Company LLC.

Midtown Manhattan, it seems, is getting hit from all sides. EY, formerly known as Ernst & Young, had plans leaked in June to relocate as much as 170,000 square feet at 5 Times Square to the New Jersey waterfront. Their new space was reported in Crain’s to a space at 121 River Street, an office building in Hoboken. New Jersey has been pro-active in attracting tenants from across the Hudson. The NJ Grow Program, for instance, provides tenants with as much as $15,000 in tax credits for every employee they move to the state—a benefit that can add up to millions of dollars in tax savings, although it’s unclear if EY has applied for those tax breaks as of yet.

RelatedFinancial Firms Expand Their Footprint In Manhattan Office Space

The Real Deal reported in August that Midtown has steadily been losing clients since 2011 to the tune of 5 million square feet. Brokerage Newmark Grubb Knight Frank calculated in the article that roughly 12 million square feet of new construction is set to come online in Manhattan in the next five years, much of it downtown and on the far West Side, which will further exacerbate the Midtown exodus. Among those heading for the hills, or at least other Manhattan districts is Time Warner (which is leaving its namesake building in Columbus Circle), white-shoe law firm Skadden, Arps, Meagher & Flom (which is packing up at 4 Times Square) and global advertising media firm GroupM (which is decamping from 498 Seventh Avenue.)

The soft market has led a number of older buildings to undergo radical revamps in order to complete with new buildings—while prices inevitably take a hit.

“The biggest value over time will be at the higher end,” JLL vice chairman Rob Martin told the Real Deal. “Buildings that rent north of $100 per foot, there has always been a limited demand, and there’s a lot more supply coming on. We’re already starting to see concession packages go up.”

“It’s a return to a tenant market,” he added. “It’s a great time to be a tenant.”

Jeff Vasishta

ABOUT THE AUTHOR Jeff Vasishta

ABOUT THE AUTHOR Jeff Vasishta

Jeff is a writer, husband and father but not necessarily in that order. As a music journalist he counts Prince, Beyonce and Quincy Jones amongst those he’s interviewed. He's also owned and flipped homes in Brooklyn, NJ, CT and PA.

  • AGORAFY
    Avocado toasts are the reason why millennials can’t afford a home, says one Australian real estate developer. #AvocadoToast #Millennials https://goo.gl/TBCPnv
  • AGORAFY
    Five years on since Superstorm Sandy, Queens’ coastal peninsula is in the midst of a development boom. #Development #Rockaways https://goo.gl/BRKRrD
  • AGORAFY
    It turns out, renters can’t get enough of good ol’ no-doorman-no-frills apartments. Too bad developers aren’t building any. #Doorman #LuxuryRentals https://goo.gl/pdnbo6
Millennials Are Fueling The Current Sizzling Real Estate Market
Ever wondered why the hosts of home improvement shows seem to be getting progressively younger, along with the fresh-faced couples getting their new properties made…
The Best Cities For Recent Grads To Rent – Without Blowing Their Entire Paycheck
What’s next post graduation? For most, the logical answer is to find a job. After the excitement of finishing your studies and the big celebration,…
Luxury Knows No Limit In Malaysia As A Deluge Of New Developments Hit The Market
The amount of newly constructed high-end real estate in Malaysia is almost as abundant as the lush vegetation which covers the tropical landscape. Despite vacant…
Don’t Call It A Commune – Upscale Co-Living Is Attracting Major Development
What may have once been referred to as a commune is today termed a co-living space. The big news that it’s not hippies with hemp…
It’s Official—New York Is Now The Most Expensive City In The World To Build
As if you didn’t already know, it’s expensive to build in New York City. Not just expensive but now officially the most expensive place in…
An Ultimate Destination For The Most Comprehensive Real Estate Data, Agorafy Prepares To Launch Nationwide
In the coming days, Agorafy will be entering a new chapter. It is the beginning of a new growth cycle in real estate technology with…
A New Beach Front Condo Building Slated For the Rockaways Amid A Slew Of New Development
Proving that New Yorkers are the masters of reinvention, particularly when it comes to real estate, a new millennial-friendly condo tower is due to rise…
Brokers Brace Themselves For Government’s Visa Clampdown To Hurt Real Estate
New York brokers are blaming the new anti immigration policies for scaring away new potential foreign property owners. Government’s stricter visa protocols means that the…

TOP 10