Q1 2023 Office Space Report: New York, NY
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
New York City is known for its status as a global hub for finance, media, arts, and entertainment. The city houses prominent businesses such as JPMorgan Chase, Goldman Sachs, Verizon Communications, The New York Times Company, Pfizer, Citigroup, IBM, ViacomCBS, Ralph Lauren, and Macy’s, among many others.
The unemployment rate for New York City reached 5.4% in the first quarter of 2023, a 30-basis-point increase over Q4 2022’s rate.
New York City’s office space market continued to follow its trends from Q4 2022 with a slowdown in leasing activity, an increase in vacancies, and a decrease in absorption.
General Area Overview & Demographics
New York City is the most populous city in the country and one of the most diverse and influential cities in the world. With a rich history, iconic landmarks, and a bustling atmosphere, the city attracts millions of visitors and residents from various backgrounds.
New York City’s Population, Economy, & Demographic Makeup
Demographically, the city’s population is incredibly diverse, with people from virtually every corner of the globe calling the city home. According to the latest available data from 2020, the estimated population of New York City is around 8.8 million residents. The city’s density is remarkable, with over 27,000 people per square mile, yet many of its residents still struggle to keep up with rent payments.
A significant Hispanic and Latino population lives in the city, comprising about 29% of the residents. The largest ethnic group is non-Hispanic whites, accounting for approximately 32% of the population. African Americans make up around 24%, while Asian Americans represent about 14% of the populace.
New York City’s economy is robust and multifaceted, serving as a global center for finance, commerce, media, art, fashion, and entertainment. It houses the headquarters of numerous multinational corporations and is renowned for Wall Street, the financial district. The city’s thriving tourism industry attracts millions of visitors annually, drawn to attractions like Times Square, Central Park, the Statue of Liberty, Broadway shows, and world-class museums.
Education is highly valued in New York City, with a vast array of public and private schools, including renowned universities and colleges. The city boasts globally recognized institutions such as Columbia University, New York University, and the City University of New York.
In terms of transportation, the city is famous for its extensive subway system, which provides convenient access to all five boroughs: Manhattan, Brooklyn, Queens, the Bronx, and Staten Island. The iconic yellow taxis, buses, and commuter trains also contribute to the city’s robust transportation network.
New York City’s vibrant neighborhoods offer a variety of living experiences, ranging from bustling cosmopolitan areas to quieter residential enclaves. From the trendy streets of SoHo and Greenwich Village to the cultural hubs of Harlem and Chinatown, each neighborhood possesses its distinct character, attracting people with diverse interests and lifestyles.
Summary of New York Office Space Performance in Q1 2023
In Q1 2023, the availability rate for Manhattan’s office space sector reached 15.6%. Net absorption for the area was negative at -300,568 square feet.
What are office space rents like in New York?
The average asking rent for New York City office space was at $78.35 per square foot in Q1 2023, the lowest asking rent seen in the city’s office space sector since June 2015: Average rents decreased nearly $1.00 from Q4 2022’s averages.
Purchase & Leasing Activity
Only $407 million of office space investment sales occurred in New York City in Q1 2023. The average sales price per square foot was $808, and the city still remains to be one of the most expensive to buy commercial real estate.
Leasing activity averaged 5.9 million square feet, with the majority coming from direct renewals.
Notable Office Space Deals in New York in Q1 2023
There were several notable deals that took place for New York City office space in Q1 2023:
- Hyundai purchased property at 13-17 Laight Street for $273.5 million at $2,532 per square foot.
- Enchante Accessories purchased property at 149 Madison Ave. for $77 million at $589 per square foot.
- Albert Malekan purchased property at 419 Lafayette Street for $29.4 million at $384 per square foot.
- Fox Television renewed their lease of 665,666 square feet at 1211 Avenue of the Americas.
These are select examples among other activity.
New Office Space Development Activity in New York in Q1 2023
Nearly 4 million square feet of new New York City office space was under development in Q1 2023. Year-over-year, Midtown Manhattan’s new supply decreased by 7.3% from Q1 2022.
The overall supply of office space in the city has increased by 35.7% to 37.6 million square feet since March of 2020.
Market Forecast for New York City’s Office Space Market
We expect to see decreases in net absorption, square footage under construction, and sublease asking rents as 2023 progresses.
The market will likely see an uptick in vacancy, while direct asking rent will likely remain at or below a similar price point.
Takeaways for Office Space Investors
Tenants continue to gravitate towards newer properties with more amenities and greater lease concessions as they seek out office and flex space, putting pressure on current landlords to update lower quality spaces or offer more competitive pricing.
With the current economic conditions, renovations are more difficult to attain. If investing in lower quality property assets, consider renovation costs or offering competitive lease terms and conditions.
Do your research, stay diligent, and happy investing.
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