If you’re a tenant looking for office space in New York City then there’s never been a better time to look for office space. On the other hand if you’re a landlord looking to lease office space then unfortunately the tables have now been turned against you as we wade through today’s post pandemic office market. Prior to Covid the New York City and national office market was the country’s strongest commercial leasing sector followed by warehouse space. But as a result of the Work From Home (WFH) phenomenon which has been created by the pandemic the city’s office market has never been weaker. This has created many great opportunities for businesses looking to lease office space, but it’s also created many long term problems for the landlords who own these office buildings.
In the last quarter of 2018 prior to covid, the Manhattan office vacancy rate was 7.7%, but that has now more than doubled and today’s Manhattan office vacancy rate is 16.1%. To combat this high vacancy many office landlords have lowered their rent prices and have also begun offering more tenant concessions in the form of free rent concessions and higher tenant improvement allowances. Other landlords have begun adding tenant amenities such as health clubs, wellness services, and dining options in an effort to lure companies and their workers back to the office.
Possibly the most telling sign of today’s distressed office market is the movement to ease restrictions on office to residential conversions. This proposal now has the support of both Governor Hochul and Mayor Adams and seems to be an inevitable result of covid’s long term effects on Manhattan’s office market. Midtown and Midtown South are the 2 largest neighborhoods where future office to residential conversions are expected. And in lower Manhattan at 25 Water Street (formerly known as 4 New York Plaza, and formerly home to JP Morgan) the country’s largest office to residential conversion is currently underway and this conversion will create 1300 new apartments. This conversion is backed by a recently secured 535.8 million dollar loan that was arranged by Newmark and the project is being developed in a joint venture by Rockwood Capital, GFP Real Estate, and Metro Loft Management.
So today’s post pandemic office market has a lot of good news for tenants looking for office space and a lot of not so good news for office landlords who find themselves struggling to fill vacancies in a declining market. Now that’s not to say that every office listing is a fire sale and there are some buildings that have managed to keep a respectively low vacancy rate. However if you’re a company looking for office space right now there are lots of good deals to be had, and the first thing that you should do is to find an experienced and knowledgeable real estate broker who specializes in office space. At Corbett & Dullea we have our finger on the pulse of the city’s current office market and we can help you get the best deal possible for your company’s next Manhattan office location in today’s post pandemic office landscape.