A Tsunami Of New Office Space Is About To Hit The NYC Market
Despite a flurry of recent big leasing deals, NYC faces a challenge in filling the 24 million square feet of new space set to hit the market.
It’s good to know that at least the make-up industry is booming even if New York’s office market could need a touch up. MAC Cosmetics are moving their HQ’s to an 86,000 square foot space at Soho Square’s 233 Spring St. re-dubbed One Soho Square. Despite MAC’s bold move, New York City has more than enough office space to go around. In fact, much of it is destined to remain empty unless tenants start to materialize.
With an estimated 24 million square feet of office space due to hit the market in the upcoming months, recent big deals from MAC, a 98,000-square-foot lease by Deloitte at 1221 Sixth Ave in April and Sailthru’s 27,320 square feet lease at One World Trade Center, NYC still faces a gaping hole to fill when it comes to office space.
“The near future overriding ‘news’ is a net addition of 3.8 million square feet of available space that was added over the past 12 months,” Robert Shapiro of Newmark Grubb Knight Frank said to the NY Post.
According to Newmark, there has been an increasing surplus of office space for most of the last twelve months with availability rising to 12.8 percent by the end of April from this time last year. Manhattan asking rents were stable at $76.20 a foot.
Competition for Manhattan space comes from revamped warehouses and older office buildings in Brooklyn and Queens luring the tech industry. Still, commercial real estate brokers are putting a positive spin on Manhattan’s ability to keep it offices filled.
“You are seeing concession packages going up, and that is where the adjustment is taking place,” Kaufman Organization principal Grant Greenspan told the Post. “It could turn around on a dime,” he says, stating that uncertainty over health care and taxes are keeping tenants skittish. “It’s more psychological than the fundamentals.”
It’s a sentiment that Bruce Mosler, head of global services at Cushman & Wakefield agrees with. “For seven years running, New York has outpaced the US for job growth,” he says. “We are looking at extending this cycle, and while nobody knows for how long, in particular in the financial-service sector, it bodes well for New York.”
According to a recent office market report in Optimal Spaces, new office leasing has been slow but Manhattan hasn’t been monolithic. Downtown had a dramatic increase, with 1.87 million square feet leased, 286 percent above last quarter and 45 percent above the five-year average. Downtown Manhattan’s office market has its best quarter in two years, led by big leases like Spotify’s 378,000-square-foot deal at Four World Trade Center. In Midtown South activity has generally been strong with asking rents up 11.7 percent to $76.65/RSF. Downtown rents dipped 2.2 percent to $56.45 per square foot.
How the market will deal with upcoming influx of new space is up for debate. Certainly there is a demand but whether it is enough remains to be seen.
“The market is full of speculation as to when this current cycle will end,” Colliers executive director Craig Caggiano to The Real Deal. “First quarter numbers showed a continuation of a healthy market.”
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