More people are starting to go back to work in offices, but plenty are staying home to remote work following the pandemic. Enough are doing so that offices nationwide are taking a hit, and the market in New York is no exception.
Manhattan’s office market in particular seems to be heading toward an imminent crisis. Data from Kastle Systems shows more than half of offices are still empty in Midtown, Midtown South, and Downtown New York City.
There’s something on the way that will exacerbate the problem in Manhattan: brand-new spaces being built that aren’t planned for occupation by the company that owns it.
Owner-occupied space is when a company erects a building specifically for the purpose of working out of it. In Manhattan, Moody’s Analytics reports that 11.47 million square feet of new offices are expected to be up for rent through 2024. That includes 6.45 million expected this year, 2.47 million in 2023, and 2.55 million the year after.
There are plenty of Class A office spaces in NYC available, which have beautiful, forward-thinking architectural designs and built-in technology that make everyday life easy – on top of feeling like you’re living in the future. But all futuristic advancements come to be the norm in time, and more and more we’re seeing older and historic buildings that lack those “smart” features having a tough time getting prospective tenants as excited about renting as they once were.
Since the United States officially labeled COVID-19 a global pandemic in March of 2020, Manhattan’s availability rate for office space has increased 71.9%. There is now 92.57 million square feet of rentable or leasable space in the city.
There are also properties being built that already have owners, like JP Morgan Chase’s 2.5 million square foot headquarters building at 270 Park Avenue. That is, however, subject to change if companies later switch course. For the time being, Colliers says Manhattan’s monthly leasing activity decreased 19.4% between February 2022 and December 2021. It now sits at 2.28 million square feet.
It’s worth noting that today’s statistics are 25.9% higher than what we saw a year ago, with 1.81 million square feet of office space leased in Manhattan. Yet that falls 36.2% below the pre-pandemic average we saw, with 2.58 million square feet of leasing volume in 2019.
Manhattan’s next non-owner occupied projects
Some of the non-owner-occupied projects coming up include enormous projects in Hudson Yards. One is a Spiral garage planned for 2.86 million square feet. A new 58-story office tower spanning an entire city block, called 50 Hudson Yards, is set to be the fourth largest office tower in all of New York City. Once completed in 2022, it’ll take up 2.9 million gross square feet and stand over 1,000 feet tall.
In the Flatiron District, the building One Madison Avenue dates back to 1893. When its renovations and rebuilding are finished in 2024, it will offer up another 1.24 million square feet of office and retail space, along with a full neighborhood and connection to the MetLife clock tower, 11 Madison, and the Flatiron building.
Demand is simply not enough to overtake supply, yet supply keeps increasing. Available office space in Manhattan clocked in at 17.2% in January.
One reason for this is the number of companies that are turning to coworking office spaces, a trend that is continually increasing in popularity. Meanwhile, the number of work-from-home positions in major companies is on the rise, jumping to 10.6% of all openings in December’s job postings.
The shift to remote work and the vast amount of new, non-owner occupied space in Manhattan are two indications that the New York office market may never fully return to pre-pandemic levels, especially as coworking demand grows.