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New York City continues to make economic progress. The city’s workforce grew by 78,900 jobs over the 12 months ending April 2013. As a consequence, the unemployment rate declined to 7.7 percent in April compared to 8.8 percent a year ago.
Reflecting continued employment growth, the office market was quite active across Manhattan, as a wide range of tenants signed leases during the first quarter. Tenant volume exceeded the previous quarter activity by 38 percent and was more than twice that of a year ago. Availability rates, however, remained relatively unchanged in Midtown North and Downtown and increased in Midtown South. Overall asking rents declined in Midtown North, but rose in Midtown South and Downtown.
A number of tenants are viewing their space needs differently than in the past. Collaborative working spaces and “green” are de rigueur; oversized workspaces are not. The recent slow absorption is the result of a combination of tenants frequently relocating or renewing at the same or reduced size and the return of numerous large blocks of space to the market.
Manhattan is blessed with the ability to continually reinvent itself. A wide range of exciting changes are in various stages of development that will alter Manhattan’s landscape.
The continued conversion of office space to residential use has kicked into high gear. The conversion of Midtown North’s iconic Sony office building and Downtown’s 49-51 Chambers St. and 346 Broadway to residential/hotel are highly visible reminders of this trend.
The proliferation of co-locating options — such as WeWork, Micro Solutions, and Regus — continues to provide innovative space options for the next generation of Manhattan’s businesses. In addition, the 2017 expansion of the Cornell NYC Tech program to Roosevelt Island will provide a steady stream of occupants for these facilities.
The proposed rezoning of Midtown North will help transform its office inventory into a more internationally competitive offering. The proposal, if enacted, will replace the current aging properties with the state-of-the-art green buildings that are in great demand by today’s businesses. It will also provide competition for the Westside development activity — especially given that the transportation access is far superior.
With the groundbreaking at Related’s Hudson Yards and Brookfield’s development in Midtown West, the Westside has finally found a way to participate in the transformation of a heavily weighted financial services economy to a much more diversified one. The Westside will offer an exciting work/play/live environment that will attract an array of space users. The more efficient buildings will provide new work accommodations that better suit today’s business requirements. The flexible layouts will enable all types of firms to configure the space in a way that best fits their needs. In addition, the ability to custom tailor the financial terms of occupancy is highly attractive either as a lease with an equity position or even as a condo. To date, several large companies, including Coach Inc. (condo), L’Oreal USA and SAP AG have signed on to take space when the building is complete in 2017.
Downtown continues to undergo a metamorphosis. Not only has it quickly recovered from Hurricane Sandy, but it has become very popular with firms priced out of the Midtown South submarket. The near completion of the World Trade Tower and the soon to be operational Fulton Street Station will give tenants additional reasons to locate there.
After a decade of high and lows with no development activity, Manhattan is now well poised to accommodate the changing space needs of this decade’s growing business base.
— Eric Thomas, senior vice president, Cresa New York