The office vacancy crisis plagues New York City-but the owners are still optimistic

2021-12-15 01:26:32 By : Mr. Jay Tong

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New York City is open-maybe too open.

In the worst crisis ever in the city, at least 7 million square feet of space are available for six new or refurbished office buildings in Manhattan.

The proposed building may still have 7 million square feet available for use. The extra space is now online or available in 18 months.

At the same time, the pandemic of working from home has led CEOs to warn that they will reduce office space by as much as 40%.

Effective rents continue to fall as Manhattan’s availability rate reaches 16%, partly due to the proliferation of subletting.

JPMorgan Chase CEO Jamie Dimon said this month that even if a 2.5 million square foot headquarters building is built at 270 Park Avenue, the bank will still reduce its business footprint.

“For every 100 employees, we may only need 60 seats on average,” Dimon said. JPMorgan Chase is the city's largest single office space user.

So commercial owners and developers in this city are walking towards a brick wall, right?

Don't write them down for now.

Insiders said that there are good reasons to believe that one day we will look back at today’s situation and treat it as a temporary, even terrible abnormality.

If all new projects continue, this is not just an additional 14 million square feet, but still only a small percentage of Manhattan’s 526 million square feet of inventory.

Douglas Durst, a large developer, got rid of any anxiety,

"We have been here before," he told the post. "People expect the office market to end. Some people gave up space, but they are back."

But is today's COVID-19 crisis different from previous crises?

"No, not at all," he added. "Every crisis we go through is different, but they all have a formula,'Well, we don't need that much space.' But in the end the market is back."

He said that the interest of tenants has rebounded:

"We are actively renting. We have a lease of 150,000 square feet and we are negotiating another 450,000 square feet."

Real estate tycoons are often very optimistic, so we found an expert who is neither a landlord nor a broker: Jim Costello, Senior Vice President of Real Capital Analytics.

"Tech companies are sending signals that they want people to come back to the office and cooperate," Costello said. "Remote work is very useful for some high-paying managers. But for the company itself, it is valuable to concentrate ordinary employees in one place, and young employees will benefit from the personal guidance of senior team members."

Robert Alexander, a powerful CBRE deal maker, leads a leasing team that includes his sons Ryan Alexander and Taylor Callahan. He boldly predicts that if a pandemic happens Under control, WFH will only account for 5% to 10% of the white-collar labor force — a far cry from the estimated value of 30% to 50% discarded.

Ryan Alexander said: "Despite the [negative] rumors and chatter, the market has indeed picked up in the last few months in terms of tenant-landlord conversations. We have reached an agreement with tenants that will bring One Vanderbilt's rental rate to 80 % Or more," he said of the SL Green skyscraper, which now has an occupancy rate of about 70%.

Callahan said the new tower is more comprehensive than the initial data. For example, although 50 Hudson Yards has theoretically rented out 80%, Black Rock and Facebook have expansion options, "The final rental rate is 85% or more."

One reason: "How do you coach an entire generation remotely?" Bob Alexander thoughtfully.

"I have talked with a lot of senior managers," he said. "Everyone wants their people to come back in the summer. There is no excuse for the vaccine. If people don't get the vaccine, then all right-we will find someone who gets the vaccine in October."

Both newly constructed towers and old towers that are about to be vacant and undergoing major capital upgrades face many risks.

At Brookfield’s Manhattan West 2 and 660 Fifth Avenues, Tishman Speyer’s Spiral, Related’s 50 Hudson Yards, Olayan Group’s 550 Madison Ave., RXR’s Five Times Square and Rudin’s Times Square Three, L&L Holdings’ Expensive space is still to be snatched, and the number varies from 425 Park Avenue

There is also a lot of usable space on Wall Streets 60, 85, and 111 in the city center. Many attractive new "boutique" office properties exist in smaller blocks, such as Erbo Properties and Higher Ground Development at The Frame in West Chelsea, which is an adaptable reuse warehouse of old office buildings built in 1915.

The new floor needs to find recipients during the most dangerous period in the city’s economic history.

"There is a lot of space in the market," acknowledged Peter Riguardi, regional president of Jones Lang LaSalle. "As people start to return to work and begin to resolve lease expiration issues, there will be a lot of rental activity, but the market needs to actively absorb it-people take up more space than they actually take up in order to properly indicate an improvement. It means we will need real job growth."

Where do employment opportunities come from?

"When the Fed injects $4 trillion into the economy, the market will soar," Alexander said. "Every major bank needs to expand, and technology-especially fintech-will follow."