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New York City is experiencing a paradoxical shift. High mortgage rates are running parallel to steadily rising prices and strong commercial leasing activity.
Even as rising housing costs tighten the residential market — with average rents in Manhattan reaching $5,295 a month — Class-A office space continues to thrive. Office leasing in the city remains robust, as artificial intelligence firms, major tech companies, financial institutions and law firms expand, representing 70% of total leasing activity for the year.
NYC-based law firm Herrick, which has one of the largest CRE practices in the city, is tracking this momentum through a sharp rise in transactions and litigation. The company is becoming more proactive as the market climate shifts.
“Real estate lawyers are always a barometer, because when things happen — good or bad — people need us, and we see it first,” said Jonathan Adelsberg, partner and co-chair of real estate at Herrick. “The fact that we are as busy as we are is reflective of the market’s underlying activity.”
Adelsberg will be moderating a panel titled Overcoming Macroeconomic Headwinds: What This Means for NYC Development, Investment and Leasing at Bisnow's New York City State of the Market event on Nov. 19.
Click here to register and purchase tickets.
Bisnow spoke with Adelsberg about the state of the NYC office market, how Herrick is helping landlords restructure deals, and his key takeaways for attendees.
Bisnow: How would you describe the state of the CRE office market in NYC?
Adelsberg: Our firm is seeing a lot of high-level activity across acquisitions, development, leasing, financing and joint ventures. The office market is particularly on fire right now.
While there is a lot of positive activity, there are still occurrences of market challenges where there are workouts, foreclosures and bankruptcies. Whether the market is positive or negative, people need real estate lawyers like us to help navigate this landscape.
Bisnow: What do you think is driving the demand for tenants to lease office spaces?
Adelsberg: A belief in the future of NYC. The office market is reflected in terms of the actual amount of leasing volume that you're seeing throughout town. The proof is in the multiyear commitments and the billions of dollars that are pouring into these new, significant office buildings.
This isn't just about sentiment. It's backed by action, with tenants signing leases and rents reaching an all-time high. A lot of that has to do with growth and optimism for the future. It's also worth noting that the contour of office leasing has changed, meaning that these buildings are amenitized in a creative way that I think draws people to them. Amenities are more integral to both the residential and office landscape.
Bisnow: How is Herrick helping landlords reposition their assets and structure deals to drive absorption and retain tenants in this competitive leasing market?
Adelsberg: I think we're at the cutting-edge of seeing the trends. Our leasing practice straddles both landlords and tenants. We have the benefit of looking at both sides of the equation. If we're representing a tenant, we have the benefit of seeing through a landlord's eyes, and vice versa. But we also have the advantage of knowing the counterparty's needs and wants and their market demands, which is the value-add that we bring to the table.
Bisnow: What do you think will be the hottest topics of conversation at the event?
Adelsberg: I think what's happening in the Class-A office market speaks for itself. However, there's still a question: What do you do with Class-B properties, and how do you reposition these properties in this unique environment to be competitive?
Repositioning could provide a whole host of opportunities and challenges. It could be how offices can be converted to residential, healthcare or educational uses. It could be end users that are taking a look at properties and using them for themselves, as opposed to investors buying them with the desire to lease them out.
Bisnow: What is the main takeaway you hope attendees will have from this event?
Adelsberg: There's a lot of activity that's going on in the market, and what distinguishes the adults from the children in the room is those who can think creatively and create new opportunities. This means bringing sides together where people may be competing, but still creating a collaborative environment for transactions to occur.
We're in a very vibrant market. We have to seize the opportunities that arise, and I think that’s the real takeaway I want people to have from the event.
Click here for more details about Bisnow's event on Nov 19.
This article was produced in collaboration between Herrick and Studio B. Bisnow news staff was not involved in the production of this content.
Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.
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