New York Office Is On An Upswing. What Are Companies Looking For, And How Can Landlords Keep Them?
New York has been leading the charge in nationwide office recovery, with office foot traffic now only 5.5% lower than its pre-pandemic levels.
Manhattan has also been ramping up on office leasing. A fourth-quarter report from commercial real estate brokerage Lee & Associates found that 10M SF of offices were leased during this time, and vacancy, at 13.9%, was at its lowest point in the last five years.
One large contributor to this recovery has been the return-to-office push spearheaded by finance firms, with technology companies following suit, Lee & Associates principal and Executive Managing Director Dennis Someck said.
“No one expected New York to rebound as quickly as it has,” Someck said. “If you looked at this six or eight months ago, no one would have thought this is what would happen.”
Many Manhattan companies have embraced hybrid work, with 69% employing a hybrid policy.
While in the past, landlords had been doing one-to-three-year leases, now they are looking for tenants to commit for the long haul — at least five to 10 years— which can help justify high construction costs, Someck said. Landlords have been embracing strategies like incorporating best-of-the-best amenities and build-outs to encourage tenants to commit to longer lease terms.
“Quality sublease space has tightened up the market because companies want to move into a space where they can attract employees, especially if they’re growing,” Someck said. “They don’t want to move into a tired, run-down, archaic sublease space.”
He said some landlords have prebuilt large office spaces so that tenants with large staffs that are moving forward with their hiring and need space immediately can move in without having to wait for the space to be constructed.
Companies have been prioritizing high-quality properties in desirable parts of Manhattan as a way to entice employees. Lee & Associates principal and Executive Managing Director Justin Myers said finance companies have been flocking toward Midtown, Hudson Yards and Grand Central, while artificial intelligence companies have eyed the NoMad, Flatiron and SoHo neighborhoods.
Due to the competition for quality spaces, tenants would need to snatch up a space quickly or risk losing out on it, Someck said.
“Because Class-A and A-plus space is very hard to find right now, companies have started looking at Class-B spaces,” Myers said. “The fully renovated buildings have leased up dramatically, and now tenants are filtering down because they have no other options.”
Among the most sought-after amenities for companies are rooftop decks, outdoor space, cafés, lounges, a fitness center and a conference center.
Lee & Associates works with New York City landlords to help them get tenants into their spaces and helps tenants find spaces and evaluate their options based on pricing, their plans for hiring, and their short- and long-term goals and needs for the space based on how often employees are coming to the office.
Companies may be set on a particular neighborhood, but if the price isn’t right or the competition is too steep, Lee & Associates can show them a desirable area that might not have been on their radar, Myers said. While clients have the final say on what space makes the most sense for their business and employees, Lee & Associates ensures they have the information they need to make their decision.
“Our relationships with landlords and brokers around the city means we understand how office deals need to be transacted and can give proper guidance to our clients,” Myers said. “Being close to our clients’ strategy helps us advise them on what’s best in terms of their options for office space in the market.”
This article was produced in collaboration between Lee & Associates and Studio B. Bisnow news staff was not involved in the production of this content.
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