Manhattan
Office Perspectives
Prepared for 452 Fifth Avenue
Research
New York March 2024
jll.com
NYC office market: 5 Themes to know
Leasing activity in 2023 ends on a high note
- Leasing activity in Q4 totaled almost 7.4 million s.f., making it 2023's strongest quarter.
- This brings total leasing activity in 2023 to 23.1 million s.f.
Financial services and law firms drove more than half of leasing activity in 2023
- Financial services companies and law firms represented more than 52% of leasing volume.
Overall vacancy in Manhattan increased but availability remains stable.
- Overall vacancy increased by 50 basis points to 17.0%.
- The majority of this is due to the completion of PENN 2 and One Madison, totaling 3.2M s.f., although anticipated.
Source: JLL Research
2 | © 2023 Jones Lang LaSalle IP, Inc. All rights reserved.
Overall Manhattan direct asking rents continue to correct slowly
- Direct asking rents declined slightly by $0.84, or 1% since last quarter to $81.00 p.s.f.
- Downtown has seen the steepest correction in direct asking rents, decreasing by almost 11% since Q1 2020, from $69.08 to $61.65 p.s.f.
- Midtown rents however have stayed more resilient with direct rents at $86.67 p.s.f..
The development pipeline has narrowed significantly
- With most of the space under construction already leased or owner- occupied, the amount of available space in new construction will continue to fall to under 2.5M s.f. This is forcing demand into the best available space into existing, highly-improved buildings.
Top of market demand shows resiliency, as tenants continue the flight to quality
- 73% of leasing volume in 2023 took place in properties with a major amenity
- Select Midtown submarket Trophy and A properties see their lowest vacancy rates in history.
Manhattan submarket overview
.
Trophy, Class A & B | M I D T O W N | M I D T O W N S O U T H | D O W N T O W N | O V E R A L L |
Inventory | 293.3M s.f. | 82.9M s.f. | 97.5M s.f. | 473.6M s.f. |
Direct vacant | 36.6M s.f. | 11.4M s.f. | 13.6M s.f. | 58.2M s.f. |
Sublease vacant | 9.7M s.f. | 3.5M s.f. | 5.7M s.f. | 18.9M s.f. |
Current Vacancy | 15.8% | 18.0% | 19.8% | 17.0% |
Direct Average | $86.67/s.f. | $85.37/s.f. | $61.65/s.f. | $81.00/s.f. |
Asking Rent | ||||
Source: JLL Research
3 | © 2023 Jones Lang LaSalle IP, Inc. All rights reserved.
Leasing volume and inventory
Leasing volume in 2023 exceeded 2020 and 2021 but fell 15% below 2022 total leasing volume as uncertainty around interest rates and the economy generally weighed down on the market for most of the year.
50M | 1996-2001 Average Volume | 480M | ||||||||||||||||||||||||||||
40.8 M s.f. | 2004-2006 Average Volume | |||||||||||||||||||||||||||||
45M | 37.7 M s.f. | 2010-2019 Average Volume | ||||||||||||||||||||||||||||
Dot-com | 35.0 M s.f. | |||||||||||||||||||||||||||||
460M | ||||||||||||||||||||||||||||||
40M | Correction | |||||||||||||||||||||||||||||
35M | Financial | 440M | ||||||||||||||||||||||||||||
Leasing volume (s.f.) | 30M | Crisis | ||||||||||||||||||||||||||||
Inventory (s.f.) | ||||||||||||||||||||||||||||||
25M | COVID-19 | 27.1M | 420M | |||||||||||||||||||||||||||
20M | 23.1M | |||||||||||||||||||||||||||||
400M | ||||||||||||||||||||||||||||||
15M | ||||||||||||||||||||||||||||||
10M | 380M | |||||||||||||||||||||||||||||
5M | ||||||||||||||||||||||||||||||
0 | 360M | |||||||||||||||||||||||||||||
1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 |
Source: JLL Research
4 | © 2023 Jones Lang LaSalle IP, Inc. All rights reserved.
New York City employment at an all-time high
The city's unemployment rate continues to trend down.
4800 | 14.0% | ||||||||||||
4.6 Million | 12.3% | 4.7 Million | |||||||||||
12.0% | |||||||||||||
(in '000s) | 4600 | ||||||||||||
10.0% | |||||||||||||
Employed Population | 4400 | Unemployment Rate | |||||||||||
8.0% | 7.7% | 8.0% | |||||||||||
4200 | |||||||||||||
6.2% | 5.4% | 6.0% | |||||||||||
4000 | 5.2% | 4.7% | 5.2% | ||||||||||
Total | 4.3% | 4.3% | 4.1% | 4.0% | |||||||||
3800 | 2.0% | ||||||||||||
3600 | 0.0% | ||||||||||||
2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |||
Total Employment | Unemployment Rate |
Note: Numbers reflect unemployment rate and all non-farm employment numbers in January of each given year.
Source: JLL Research; New York State Department of Labor; U.S. Department of Labor 5 | © 2023 Jones Lang LaSalle IP, Inc. All rights reserved.
NYC firms are hiring, overwhelmingly for in-office jobs
In-office jobs dominate the share of job postings in the city, as firms continue to want employees in the office.
Number of job postings, remote and non-remote | Available Jobs | ||||||||||||||||||||||||
300000 | |||||||||||||||||||||||||
per available worker | |||||||||||||||||||||||||
250000 | |||||||||||||||||||||||||
Management | Biz & Financial Ops | ||||||||||||||||||||||||
200000 | 1.8 | 2.5 | |||||||||||||||||||||||
Jobs per | Jobs per | ||||||||||||||||||||||||
150000 | unemployed | unemployed | |||||||||||||||||||||||
worker (Dec 2023) | worker (Dec 2023) | ||||||||||||||||||||||||
100000 | Computer & Math | Legal | |||||||||||||||||||||||
50000 | 8.5 | 2.6 | |||||||||||||||||||||||
Jobs per | Jobs per | ||||||||||||||||||||||||
unemployed | unemployed | ||||||||||||||||||||||||
0 | worker (Dec 2023) | worker (Dec 2023) | |||||||||||||||||||||||
Mar-20 | May-20 | Jul-20 | Sep-20 | Nov-20 | Mar-21 | May-21 | Jul-21 | Sep-21 | Nov-21 | Mar-22 | May-22 | Jul-22 | Sep-22 | Nov-22 | Mar-23 | May-23 | Jul-23 | Sep-23 | Nov-23 | ||||||
Jan-20 | Jan-21 | Jan-22 | Jan-23 | Jan-24 | |||||||||||||||||||||
Remote | Non-Remote |
Source: JLL Research; Lightcast; New York State Department of Labor 6 | © 2023 Jones Lang LaSalle IP, Inc. All rights reserved.
Leasing trends reflect the importance of amenities
Buildings with amenities attract more leasing activity and higher rents in general, with social and wellness amenities becoming more popular.
73%
of leasing activity in 2023
was within
amenitized properties
Top of Market leasing by amenity, pre- and post-COVID
70% | ||||||||||
60% | ||||||||||
50% | 51.7% | 53.3% | ||||||||
40% | 40.3% | 39.5% | 48.9% | |||||||
30% | 33.1% | 38.7% | ||||||||
20% | 28.8% | |||||||||
10% | 12.2% | 17.3% | ||||||||
0% | ||||||||||
Conference Center | Tenant Lounge | Gym | Proximity to Transit | Outdoor Space | ||||||
+11.4% | +10.7 | +5.6 | +5.1 | +4.4 |
Pre-COVID | Post-COVID | |
Note: Major amenities include a gym, conference center, tenant lounge, tenant-only outdoor space, restaurant, parking garage, event space.
Source: JLL Research
7 | © 2023 Jones Lang LaSalle IP, Inc. All rights reserved.
Tenant demand for amenitized buildings has resulted in:
Representative Amenities
Source: JLL Research
8 | © 2023 Jones Lang LaSalle IP, Inc. All rights reserved.
Historic Manhattan new construction
The wave of new construction, driven by Hudson Yards, mirrored the NYC pipeline (1960-1990); reduced supply anticipated over the next 5-10 years.
14M
Average Annual Delivery per Decade
1960-1989: 6.2M SF
12M | 2000-2017: 1.9M SF | 11.6M | ||||||||||
10M | 2018 -2023: 7.8M SF | |||||||||||
(s.f.) | 2024-2029: 1.7M SF | 9.4M | ||||||||||
8.3M | 7.9M | |||||||||||
Financial Crisis | ||||||||||||
development | 8M | |||||||||||
6.4M 6.3M | 5.7M | 6.1M | ||||||||||
6M | 5.3M | |||||||||||
5.0M | 4.9M | |||||||||||
New | 3.6M | |||||||||||
4M | 3.0M | 3.2M | ||||||||||
2.6M | 2.6M | 2.3M | 2.9M | |||||||||
2.1M | ||||||||||||
2.1M | 1.4M | 1.8M | ||||||||||
2M | 1.2M | |||||||||||
1.0M | ||||||||||||
0.7M | 0.7M | 0.7M | ||||||||||
0 | 0 | 0 | 0.1M 0.3M | 0.3M | ||||||||
0 | ||||||||||||
60's | 70's | 80's 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 |
Note: Delivered is a property that underwent full renovation or new construction that can be occupied; Under Renovation is an existing property that is undergoing a renovation that fully repositions the building in the market; Under Construction is a property that is currently in the process of being built from ground up; Planned On Hold is a property that is ready to be built on spec but currently can't do to various internal or external factors;
Proposed, Needs Anchor is a property that is ready to be built, but needs an anchor tenant before it can continue; Speculative is a property that is a proposed development that is either unlikely to be developed or is planned far into the future Source: JLL Research
9 | © 2023 Jones Lang LaSalle IP, Inc. All rights reserved.
New development slows significantly - high construction costs/interest rates
Nearly 40M s.f. has been delivered in the past 5 years, but the pipeline of new supply over the next 5 years is expected to be around one-fifth this amount, as the cost to build continues to rise and projects are put on hold.
14M | |||||||||||
12M | 11.6M | ||||||||||
10M | 9.4M | 7M s.f. | |||||||||
(s.f.) | 8.3M | ||||||||||
7.9M | over next 5 years | ||||||||||
New development | 8M | ||||||||||
6M | 6.1M | ||||||||||
4M | 3.6M | ||||||||||
2.9M | 3.2M | ||||||||||
2M | 1.0M | ||||||||||
0.7M | |||||||||||
0.3M | |||||||||||
0 | |||||||||||
2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | |
Delivered | Under Renovation | Under Construction | Planned On Hold |
35.8M
TBD
40M
35M
30M
25M
20M
15M
10M
5M
0
Note: Delivered is a property that underwent full renovation or new construction that can be occupied; Under Renovation is an existing property that is undergoing a renovation that fully repositions the building in the market; Under Construction is a property that is currently in the process of being built from ground up; Planned On Hold is a property that is ready to be built on spec but currently can't do to various internal or external factors;
Proposed, Needs Anchor is a property that is ready to be built, but needs an anchor tenant before it can continue; Speculative is a property that is a proposed development that is either unlikely to be developed or is planned far into the future Source: JLL Research
10 | © 2023 Jones Lang LaSalle IP, Inc. All rights reserved.
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PBC - Property and Building Corp. Ltd. published this content on 17 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 March 2024 15:50:05 UTC.