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From 2020 bust to 2024 boom.
Manhattan’s office market mounted a stirring recovery from its pandemic doldrums, with space so tight that tenants wanting to move or expand are out of luck.
Companies such as Singapore-based sovereign wealth fund Temasek, which has 27,000 square feet at the Seagram Building at 375 Park Ave., wanted to grow there — but no more space was available, sources told The Post.
It’s happening all over Midtown. Available floors quickly are gobbled up before data-trackers even know about it, not only at newly constructed “trophy” towers but at sound older locations as well.
For example, although authoritative database Costar shows six floors available at 390 Park Ave., sources said two floors were already taken by Atarios Capital and CBRE Investors is close to a deal for the other four.
Law firm Baker Hostetler, based at 45 Rockefeller Plaza, is looking for more space than its current 90,000 square feet — but is similarly struggling to find it, according to sources.
Bryant Park Corporation president Dan Biederman said, “Almost all of the landlords in our area are telling prospective tenants, ‘Sorry, we have no space left.’”
Legendary CBRE dealmaker Mary Ann Tighe crystallized the situation on a recent podcast, saying, “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.”
Tighe added that of the mere 2.4 million square feet of new space to be completed by the end of 2026, 79% is already pre-leased.
Much-discussed residential conversions have little or nothing to do with the tightened commercial market, insiders agree, because the mostly older converted buildings were turned into apartments precisely because they were useless for modern offices.
Cushman & Wakefield broker Mark Weiss, who represents tenants such as Blue Owl Capital and law firm Ropes & Gray which recently signed leases for larger digs, said, “Some tenants have the false perception that the market’s open, there’s nobody in the offices — but in fact it’s tighter than it was in 2019.”
The demise of work-from-home helps boost demand, Weiss said.
“At the beginning of 2024, most companies came to the realization they must have their workforce together in their offices.”
He said the trend occurred industry-by-industry — “elite” financial firms first, followed by commercial banks, law firms, and technology fourth. “The only major industry not yet back is creative and we’re starting to see that happen too,” he said.
Marc Holliday, CEO of SL Green, the city’s largest commercial landlord, said in an investors call this week, “Vacancies will continue to fall as low as [12%] in midtown and [below 7% in the prime Park Avenue corridor — maybe the tightest conditions I’ve ever seen for prime space in my career. Hybrid work is already baked in and demand continues to rise.”
He added, “Most importantly, because there is no new inventory, rents will rise … There are zero new ground-up office projects currently underway in core Midtown.”
Data supports the individual and anecdotal impressions.
JLL reports that November’s 2.7 million square feet of leasing brought the year’s total to Nov. 30 to 25.3 million square feet. That was already more than in all of 2023 with December often the busiest month for closings still to come.
The overall Manhattan availability rate — such as CBRE’s estimated 18.9%, about the same as 12 months ago — doesn’t reflect the growing strength of the high-end mark or the crisis at the low end.
Availability on Park and Sixth Avenues, at the World Trade Center, Hudson Yards, Brookfield Place, Midtown West and certain trophy towers such as the Empire State Building, SL Green’s new One Vanderbilt and Brookfield’s older Grace Building is between near-zero and 10%. Such buildings are home to many more employees and generate much more tax revenue than older stock in locations such as the FiDi area and the Garment District, where vacancy runs above 20%.
Meanwhile, according to tracking service VTS, demand for office space in the city crested upward to 12.5 million square feet, up 50% over the prior three months.
Tighe attributed to scarcity of new product in part to the fact that, “We never tore down our old buildings” to make room for new ones.”
She said, “We need big-footprint sites, not only boutique-size ones.” To get such a large footprint usually requires tearing down an existing skyscraper, as JP Morgan Chase did to replace its old tower with a new one.
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