New York City Office Leasing Report Year End 2021
Quiet streets in the Financial District
New York City Office Leasing Report Year End 2021. The Covid-19 Omicron variant has curtailed the return-to-office plans of many companies. As a result, they continue to operate remotely and office usage in NYC remains among the lowest in the US. Even before Omicron, NYC companies were struggling to lure workers back to the office. The Partnership for New York surveyed large employers during the period of October 19- 29, 2021 and found that “28% of Manhattan office workers are in the office on an average weekday, with only 8% in the office five days a week, while 54% remain fully remote.” Additional findings were that 49% of Manhattan office workers are expected to be in the workplace on an average weekday by the end of January 2022 and larger firms project the slowest pace of return to offices. When the Partnership asked employers to rank the factors to which they attribute the slow return to the office the responses were: (1) Concern about Covid-19; (2) Employees’ preference for remote work; (3) Challenges related to children; (4) Commuting issues; and (5) Perceptions of poor public safety- particularly in Midtown Manhattan.
The work-from-home model is preferred by many employees and has proven to be cost-effective and reasonably productive, although less so than working at an office. In keeping with this some corporations have now made full-time work-from-home or a hybrid schedule (both home and office), a part of their employment terms.
Costar’s Analysis of New York City’s Office Market
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CoStar is the world leader in commercial real estate information and has the most comprehensive database of real estate data throughout the US, Canada, UK, France, Germany, and Spain. Costar Group Inc. includes well- known brands like Loopnet, Emporis, Apartments.com, Home.com and BizBuySell,
- Vacancy Rate: 11.8% ↑
- Market Rent: $56.70*↓ (The income that a property would most probably command in the open market. This is the weighted average across all Manhattan office buildings.)
- 12 Month Rent Growth: -1.8%
- Total Rentable Building Area: 964,092,951 SF
- Under Construction: 22,337,992
New York City Office Leasing Activity
Lower Manhattan viewed from Hoboken Terminal
With so much office space underutilized, many companies are reluctant to rent new space and leasing activity has declined substantially over the past 12-months. Many large new leases have come from the tech industry (Facebook, Apple, Stripe, TikTok) which are increasing their headcounts and can afford new offices that remain partially occupied. Much of the other leasing activity are renewals where companies received favorable terms to sign extensions.
345 Park Avenue, 644,615 SF renewal.
2 Penn Plaza, 425,837 SF new lease.
100 West 33rd Street, 513,000 SF renewal.
30 Rockefeller Center, 339,833 SF renewal.
180 Remsen St, Brooklyn, 255,091 SF new lease.
550 Madison Avenue, 241,647 SF new lease.
Thoughts about the Office Market
For the foreseeable future, office Tenants will have strong leverage when negotiating new leases and renewals.
There will be fierce competition among Property Owners to secure new business and retain existing Tenants.
New York City office buildings can be divided into two segments: Class A properties and “everything else”. Successful companies will take advantage of the current environment by leasing high quality office spaces in amenity-rich buildings at historically favorable terms.
Class A and “in demand” properties will compete primarily by offering enhanced Tenant Incentives. These include lengthy rent concessions (the free rent period) and large cash contributions used for the construction of new offices. Modest rent discounts can be expected.
Lower quality properties will compete by offer substantial rent discounts.
Pragmatic Landlords recognize the office market has been disrupted and that new business strategies are needed to motivate leasing. They include: (1) Upgrading building public areas; (2) Applying Covid-19 related health protocols including enhanced air filtration, touchless entry and frequent cleaning; (3) Pre-building modern move-in ready office suites; (4) Offering flexible leases with shorter terms and opt-out clauses; (5) Delivering office space fully furnished with an internet connection; (6) Installing popular building amenities such as a conference center, quick service dining, and a fitness/wellness center; and (7) Providing a co-working facility as a service to existing Tenants and as a means to attract new business.
Office Tenants that are flexible with their lease term and space design can negotiate steep rent discounts with a Sublease. Read our recent report: Sublease Risk & Rewards.
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About Cogent Realty Advisors, Inc.
Cogent Realty Advisors is an independent and licensed no fee Realtor with 20 years of experience representing businesses that lease NYC office space. We offer leasing solutions for office Tenants seeking stability and value in uncertain times. For information phone Mitchell Waldman at (212) 509-4049.
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