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



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.

    Stefano Boeri, the architect mastermind behind the famous plant-covered skyscrapers, is now designing Forest Cities in Liuzhou, China. #ForestCity #China
    Auction is the second scheduled in a month for a One57 unit and it could set a NYC foreclosure record. #BillionairesRow #Foreclosures
    Once a couch-surfing website, Airbnb moves on to luxury properties, further disrupting hospitality industry. #Airbnb #Luxury
Four Countries To Retire In With $200K In Savings—And How Much Real Estate Costs There
Ever dreamed of retiring abroad? You know, affordable healthcare, better climate, more positive news—becoming an expat seems like an enticing option, especially one you no…
While Other Real Estate Platforms Start Charging Agents $3-Per-Day Exposure Fee, Agorafy Remains Accessible To All
Real Estate searching platform are always finding news ways to diversify their revenues models. Case in point—on Tuesday July 18, Streeteasy, one of New York…
Is Real Estate Crowdfunding The Fix That Urban Housing In America Really Needs?
Saving money for a down payment? One can only hope. Most millennial in their twenties or thirties are mortified that they might never be able…
Brooklyn And Queens’ Real Estate Sub-Markets Continue Their Ascent To The New Heights
So, the sales prices in Brooklyn and Queens hit record highs. Again. Just like they did in December 2016 and at the end of this…
The Economy Of Car Services And Delivery Apps Might Be Making NYC Less Eco-Friendly
Living in an eco-friendly neighborhood is a good thing. And, as it always the case with the good things, it also costs more. High rents…
Building Communities: What The U.S. Developers Should Learn From Soho China
As our world emerges into the new period of globalization and technology, some of the most important by-products of this process are buildings that have…
Five Reasons Why All Entrepreneurs Must Keep Their Eyes On China
It is hard to overestimate the importance of Chinese influence on the modern global economy. Carving out a place in Chinese market and winning over…
Airbnb Up Their Game With A New Luxury Tier Featuring Mansions And Villas
Airbnb is about to seriously up their game. First, the company started testing a new service called Select in an attempt to push accommodation listings…