Newer Manhattan Offices Visited 12% More Than Class-B Buildings, New Study Finds
New York City landlords have publicly criticized the most-commonly cited metric of office occupancy, claiming it doesn't track the city's newest, most popular buildings.
In response, the Real Estate Board of New York, the industry's chief advocacy group, released a study this week with data from location tracking firm Placer.ai, showing that average visits to Manhattan office buildings last year were 62% of pre-pandemic levels.
What's more, according to Placer.ai data, which tracked 250 office properties across location and class, Class-A offices hit 66.3% of the pre-pandemic visitation average last year, compared to Class-B properties at 53.6% of their previous visitation rates.
The data from Placer.ai — the country’s biggest provider of anonymized location intelligence data — is part of REBNY’s attempt to better understand the health of the city's enormous office market in a way that extends beyond tracking building occupancy.
“As the office sector continues to evolve in the wake of the pandemic, it is critical to gain a nuanced understanding of how building visitation trends are playing out in different segments of the market,” REBNY Director of Market Data and Policy Keith DeCoster said in a statement.
The report tracks preliminary findings REBNY intends to continue to analyze over the next few months. The data reveals a marked improvement in building visitation rates over the last two years, with average building visitation rising from 48% in 2021 to 62% in 2022.
Plus, it also shows variation across not just asset type, but location.
“During 2021, visitation rates for A+ and A buildings in Downtown and Midtown were only slightly above Class B visitation rates,” the report states. “Over the course of 2022, visitation rates in Class A properties in Downtown and Midtown have surged well above rates for Class B properties. Visitation rates in Midtown's Class B sector posted a larger year-on-year gain than in Midtown South.”
The Placer.ai data paints a somewhat rosier picture than Kastle Systems' Back-to-Work Barometer, which shows that New York City offices are less than half as occupied on average than they were before the pandemic, below the national average.
But Kastle's data reportedly doesn't track buildings owned or managed by many of the city's owners of its newest buildings, like SL Green, Vornado, Tishman Speyer, Rudin Management, Silverstein Properties, Brookfield, Boston Properties, Related or Rockefeller Group.
In its national January report, Placer.ai researchers wrote that office visits had plateaued at roughly 60% of 2019 levels through the second half of 2022 and into 2023.
Regardless of whether buildings are at 62% of pre-pandemic visits or 48% occupied, many office owners in the city are feeling increased financial pressure as the cost of capital has gone up considerably and leasing activity has decreased.
There have been multiple loan defaults in recent weeks, with Columbia Property Trust defaulting on $1.7B in loans backing a seven-building portfolio across four states. Overall, commercial property prices have dropped 14% from their peak in March 2022, according to recent analysis by Green Street, and they fell last month at the fastest rate since 2010, per MSCI Real Assets.