Mar 30, 2023
Manhattan Office Vacancy Hits Record as Landlords Add Space
(Bloomberg) -- Manhattan’s office-vacancy rate is at a record high as new developments add even more space to the struggling market.
More than 16% of space was empty as of the first quarter, according to brokerage Jones Lang LaSalle Inc., which tracks about 470 million square feet (44 million square meters) of Manhattan offices. Leasing is at its lowest levels since the second quarter of 2021.
“You’re having this anemic leasing activity, more space is being added in the form of newly constructed or newly renovated space, but also sublease space continues to pile up,” said Andrew Lim, director of research at JLL.
The market was inundated with more than 1.5 million square feet of office space in the first quarter with the completion of 660 Fifth Ave.’s redevelopment.
Not all of that space will stay empty as landlord Brookfield Properties has signed leases with finance firms including Macquarie Group Ltd. The building, formerly known as 666 Fifth Ave., has gained traction after undergoing $400 million in renovations that include a new lobby, elevators and facade.
Still, the increase in space ramps up the pressure on landlords that own older buildings across the city. With the rise in remote work, tenants are favoring newer developments or towers that have been recently renovated.
“We have to reinvent our office space,” New York Mayor Eric Adams said in an interview with Bloomberg Thursday, adding that empty spaces should be converted to housing. “We have a housing crisis. We already have structures that are built.”
Average rents remained flat at $76.96 a square foot, buoyed by growing rates at top-quality buildings, especially newly built ones. That helped balance out falling rents at older spaces and offices up for sublease.
--With assistance from Laura Nahmias.
(Updates with JLL comment in third paragraph, mayor comment in seventh paragraph)
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