NYC Office Leasing Report Q2 2022
NYC Office Leasing Report Q2 2022. With the Covid-19 pandemic behind us most companies are nudging their employees to return to the office. But office occupancy remains low. According to Kastle Systems, as of June 27th, NYC office occupancy was only 42.5% and Kastle’s ten city average was 44.2%. It is now apparent that the pandemic was only one of several “disruptors” that has changed the nature of work.
The work-from-home model is preferred by many employees, and it has proven to be cost-effective and 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 (working from both home and office), a part of their employment terms.
In a recent story appearing in the Real Deal, Arvind Krishna IBM’s CEO, predicted that “Only 60% of office workers will ever return full-time” and “I think we’ve learned a new normal.”
The Partnership for New York City conducted a poll between February 17- March 11, 2022, and found that “concern about public safety, especially in the transit system, is the single biggest obstacle to mobilizing the return to work in the city’s office buildings.” Yet this “obstacle” is absent from the residential apartment sector where pricing for rentals and purchases have reached historic highs.
Manhattan residential real estate sales hit a record $7.3 billion in the first quarter.
Manhattan Rents Soar More than 25% Across Most Neighborhoods
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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.
Key Costar Manhattan Office Building Indicators:
- Available Asking Rent/SF: $55.11* ↓
- Vacancy Rate: 16.9% ↑
- Vacant SF: 74.6 M ↑
- Sublet SF: 23.2 M ↑
- Inventory SF: 441 M ↑
- Existing Buildings: 1,598 ↑
- Under Construction: 6.2 M ↓
*Weighted average across all Manhattan office buildings.
NYC Office Leasing Activity
Even though office usage remains less than 50% of pre-pandemic levels, large affluent firms continue to lease space.
283,814 SF renewal at 200 Fifth Avenue.
263,875 SF new lease at the Spiral (66 Hudson Boulevard).
227,201 SF renewal at Avenue of the Americas Plaza (125 West 55th Street).
221,764 SF new lease at 660 Fifth Avenue.
144,903 SF new lease at Two Manhattan West (385 9th Avenue).
Office Leasing Report Analysis of the NYC Office Market
Office Tenants continue to have strong leverage when negotiating new leases and lease renewals.
There is fierce competition among property owners to secure new business and retain existing Tenants.
Successful companies are taking advantage of the current environment by leasing high quality office spaces in amenity-rich buildings at favorable terms.
Class A and “in demand” properties are competing 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.
Lower quality properties are competing by using hefty rent discounts.
Pragmatic Landlords recognize that the office market is disrupted and are using new strategies to motivate leasing. These include: (1) Upgrading building public areas; (2) Applying Covid-19 related health protocols such as enhanced ventilation, air filtration, touchless entry and frequent cleaning; (3) Pre-building modern move-in ready office suites; (4) Offering flexible leases with shorter terms; (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 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 Rewards and Sublease Risks.
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About Cogent Realty Advisors, Inc.
Cogent Realty Advisors is a licensed independent NO FEE Realtor that represents New York businesses that lease office space. Cogent Realty provides intelligent real estate solutions for Tenants of all sizes and from all industries. For information phone Mitchell Waldman at (212) 509-4049.
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