From the crash of 2020 to the boom of 2024.
Manhattan's office market has made a remarkable recovery from the pandemic-induced downturn, and space is so tight that tenants looking to relocate or expand are having trouble.
Companies such as Singapore-based sovereign wealth fund Temasek, which has 27,000 square feet of space in the Seagram Building at 375 Park Avenue, had hoped to grow there, but lacked more space. was not available, sources told the Post.
It's happening all over Midtown. Available floors, not only in newly constructed “trophy” towers, but also in healthy old locations, are quickly exhausted before data trackers notice.
For example, the authoritative database Costar shows six floors available at 390 Park Avenue, but officials say two floors are already occupied by Atarius Capital, leaving the remaining four floors. CBRE Investors is said to be close to reaching an agreement.
Baker Hostetler, a law firm based at 45 Rockefeller Plaza, is looking for more space than its current 90,000 square feet, but is having trouble finding space as well, sources said. .
“Almost every landlord in our area is telling prospective tenants, 'Sorry, we don't have any space,'” said Dan Biederman, president of Bryant Park Corporation.
Legendary CBRE dealmaker Mary Ann Tye specifically addressed this situation on a recent podcast, saying: By 2027, there will be problems. ”
Tai added that 79% of the just 2.4 million square feet of new space, scheduled to be completed by the end of 2026, has already been pre-leased.
Insiders agree that the much-discussed residential transformation has little or nothing to do with the tight commercial market. That's because most of the old, renovated buildings were converted into apartments precisely because they were unsuitable for modern offices.
Mark Weiss, a Cushman & Wakefield broker who represents tenants including Blue Owl Capital and the law firm Ropes & Gray, said the law firm recently signed a large mining lease. “Some tenants have a mistaken belief that the market is open and there is no one in the office, but in fact, in 2019, “It's tighter than ever.”
The end of working from home is helping to boost demand, Weiss said.
“At the beginning of 2024, most companies realized they had to bring their employees together in the office.”
He said this trend is happening across industries, with “elite” financial companies coming first, followed by commercial banks, law firms, and technology fourth. “The only major industry that hasn’t come back yet is the creative industries, and we’re starting to see that happen,” he said.
“Vacancy rates will continue to fall to their lowest levels,” Mark Holliday, CEO of SL Green, the city's largest commercial landlord, said on an investor conference call this week. [12%] in Midtown and less than 7% in the[Park Avenue prime corridor]. Probably the toughest conditions for a prime position in my career. Hybrid work is here to stay, and demand continues to grow. ”[below7%intheprimeParkAvenuecorridor—maybethetightestconditionsI'veeverseenforprimespaceinmycareerHybridworkisalreadybakedinanddemandcontinuestorise”[パークアベニューの一等地回廊では7%未満。おそらく私のキャリアの中で一等地にとって最も厳しい条件だろう。ハイブリッドワークはすでに定着しており、需要は増加し続けています。」[below7%intheprimeParkAvenuecorridor—maybethetightestconditionsI’veeverseenforprimespaceinmycareerHybridworkisalreadybakedinanddemandcontinuestorise”
He added, “Most importantly, rents will go up because there is no new inventory… There are zero new ground-up office projects currently underway in core Midtown.”
The data supports my personal and anecdotal impressions.
JLL reported 2.7 million square feet of leases in November, bringing the total for the year to Nov. 30 to 25.3 million square feet. This number is already higher than all of 2023, with December often being the busiest month for upcoming financial results.
Manhattan's overall vacancy rate (which is about the same as 12 months ago, such as CBRE's estimate of 18.9%) does not reflect the rise in luxury momentum or the crisis in the lower end.
Vacancy rates at Park and 6th Avenue, World Trade Center, Hudson Yards, Brookfield Place, Midtown West, and certain trophy towers such as the Empire State Building, the new One Vanderbilt at SL Green, and the old Grace Building at Brookfield. is approximately between zero and 10%. . These buildings house more employees and generate far more tax revenue than older buildings such as FiDi areas and garment districts, where vacancy rates exceed 20%.
Meanwhile, demand for office space in the city reached 12.5 million square feet, increasing 50% in the past three months, according to tracking service VTS.
Tai said part of the reason for the lack of new products is the fact that “old buildings were never demolished” to make way for new ones.
She said, “We need large-scale sites, not just boutique-sized sites.” Obtaining such a large footprint typically requires demolishing an existing skyscraper, as JPMorgan Chase did when replacing an old tower with a new one.
