New York Market Overview
- Total Manhattan Class A Office vacancies increased from 8.8 % vacant to 9.1 % vacant
- Total New York City Office vacancy increased from 8.1 % vacant to 8.2 % vacant
Manhattan OfficeNew commercial leasing plummeted during the second quarter of this year, one of several signs that the city should brace for an increasingly sluggish economy. Leasing activity dropped 15.6% from the same time last year, with only 7 million square feet rented. This is the second consecutive decrease in leasing activity, following the first quarter’s 6% year-over-year drop. This quarter, most leasing activity occurred in Midtown with 4.4 million square feet where median rent was $79.18 per square foot, followed by Midtown South with 1.5 million square feet where rent averaged $76.45 per square foot.
Midtown Manhattan has a lot of empty office space. Since 2011, Midtown tenants have vacated 5 million square feet more than they rented. There are 86 contiguous blocks of Midtown office space larger than 100,000 square feet either on the market now or set to become available within the next few years, that is up 72% from 2007’s 50 blocks. The district’s 10.5% availability rate has remained relatively steady. 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. About 3.8 million of that is already leased up largely from tenants expected to depart from Midtown which is bound by 65th Street to the north and around 30th Street to the south, from river to river.
Total Manhattan Class A Office vacancies increased from 8.8 % vacant to 9.1 % vacant
The Midtown office submarket has 234 million square feet, followed by Downtown with about 86 million and Midtown South with 73 million. At least 10 large blocks are set to become available on Park Avenue, one of the priciest office markets in the city.
Buildings that rent north of $100 per foot, have limited demand, and there is a lot more supply coming on. Concession packages are going up.
The New York metropolitan area’s office-using job growth slowed dramatically over the past 12 months, adding to concerns over a potential supply glut in the office market. Most new jobs were added in sectors that do not primarily use offices, such as healthcare, retail or education. Between July 2015 and July 2016, only 19,000 (1.4 percent growth) such jobs were added, compared to 49,000 and 46,000 in the two prior years.
The slowdown in job growth comes as developers are adding millions of square feet to New York’s Class-A office supply through developments such as Hudson Yards, Manhattan West, the World Trade Center and One Vanderbilt. Skeptics have long worried that the new supply is exceeding demand. Meanwhile, employment in finance and insurance still has not recovered from the 2008 crisis and continues to be a drag on the office market’s disappointing revenues among New York’s public companies, less than a quarter recorded revenue growth of 5% or more which creates pressure to cut costs. The other is cyclical. Seven years into the recovery, job growth should be expected to slow down.