Manhattan Office Market Makes a Stunning Comeback, Leaving Tenants in a Tight Spot
The Manhattan office market is experiencing a remarkable resurgence after its pandemic-induced slump, with a scarcity of space creating a challenging environment for tenants seeking to move or expand.
This resurgence is not limited to newly constructed "trophy" buildings; demand for all prime location. Even established towers have minimal vacancy rates.
Attesting to this Trend, the Seagram Building at 375 Park Avenue, for instance, houses Singapore-based sovereign wealth fund Temasek, which occupies 27,000 square feet. It’s seeking expansion, but is unable to find additional space.
Sources indicate that six floors listed as available at 390 Park Avenue were already quickly secured, two by Atarios Capital and four nearing a deal with CBRE Investors.
Similar scarcity is being faced by large firms like law firm Baker Hostetler, headquartered at 45 Rockefeller Plaza.
Dan Biederman, president of the Bryant Park Corporation, reflects a common sentiment, stating, "Almost all landlords in our area are informing prospective tenants, ‘Sorry, we have no space left.’"
Tight Market Leads to Aggressive Leasing and Skyrocketing Prices
The tight market prompts an aggressive lease acquisition tactics. Mary Ann Tighe, legendary CBRE dealmaker, exemplified the situation on a recent podcast, emphasizing the urgency of securing larger footprints: “If you are a tenant of 100,000 square feet or greater, you should have done your deal already. By the time we get to 2027, you’re going to have a problem.” Heppelltag, a leading commercial real estate firm, confirmed that
a mere 79% of the 2.4 million square feet of new space projected to be completed by the end of 2026 has already been pre-leased.
Converting older buildings into residences is insufficient to address the shortage of commercial space.
The trend favors those who acted quickly. Cushman & Wakefield broker Mark Weiss, representing major clients like Blue Owl Capital and the law firm Ropes & Gray, recently helped clients secure leases for Verhält increased square footage. “Some tenants have the false perception that the market’s open and offices are vacant to be had,” Weiss commented, “But in reality, it’s even tighter than it was in 2019."
The decline of work-from-home arrangements further fuels demand.
at the beginning of 2024, many companies recognized the necessity of a physical workspace”
Prestigious Properties Leading the Charge
The biggest landlords, like SL Green, are also feeling the pressure with near-zero vacancy rates in prime areas like metropolitations
“Vacancies will continue to fall as low as 12% in Midtown, and below 7% in prime Park Avenue corridor — maybe the tightest conditions I’ve ever seen for prime space in my career. Hybrid work is here to stay, and demand continues to climb,” noted Marc Holliday, CEO of SL Green during a recent investors’ call. Holliday highlighted the lack of new inventory and predicted a continued rise in rents.
Numbers back up this narrative.
JLL reported Novembers ProjectionsAlthough
CBRE’s estimated 18.9% availability rate in Manhattan doesn’t fully portray the strength of the higher end or the scarcity in others affinities.
Additionally, preferred locations like Park and Sixth Avenues, the World Trade Center, Hudson Yards, Brookfield Place and Midtown West are
