NYC office market rebounds quickly as NYC demand surges 40%

Steve Cuozzo

Business

realty check

By Steve Cuozzo

Manhattan’s pandemic-pummeled office market is headed for a spectacular rebound — and not only landlords, but business advocates and eatery owners are thrilled.

Although the Manhattan office market hit bottom in 2023 with more than 20% vacancy rate, the short-term future looks rosier, according to a new report from national real estate technology platform VTS.

Its latest quarterly Office Demand Index (VODI) found that demand for space in the Big Apple rose nearly 40% in 2023 over the previous year — lifting demand to 75% of pre-pandemic times.

By comparison, office space demand grew by only an average 19.6% around the US. The New York City market is the nation’s largest by far with nearly a half-billion square feet. Runner-up Los Angeles has only 317 million square feet and much-in-the-news Miami  a mere 41 million square feet, according to brokerage CBRE.

VTS chief strategy officer Ryan Masiello said its data tends to lead the market by six to nine months. 

“Our prediction is that this year, New York City will break 30 million square feet of total leasing, the highest since before the pandemic,” he said.

New York City saw nearly 43 million square feet of new leases, expansions and renewals in 2019. 

Deals made in 2023 totaled 26 million square feet according to CBRE, which was 11% lower than in 2022.

The VTS numbers don’t reflect actual new leases and expansions, but rather the amount of space that companies are seeking.

Its data is based on lease proposals, company visits to “kick tires” at office buildings and other types of information VTS gets from its client landlords, which Masiello said constitute 80% of the market.

CBRE tristate CEO Mary Ann Tighe commented that the  VTS data “affirm what our  own research is seeing and what our brokers feel “on the ground.”

Kathryn Wylde, president of the Partnership for New York City business-advocacy organization, said the findings were “consistent with anecdotal evidence from our members, many of whom are re-upping leases  or moving to newly renovated or brand new spaces.”

She noted, “Financial and professional services industries, which are our  major office employers and tenants, account for an out-sized share of the tax revenues that fund municipal services.

Keeping those businesses and their employees in the city  are not just good for our economy, but essential for the quality of life across all five boroughs.”

Several deals that were in the works last year actually got done this week. 

Sources told The Post  that Barclays Bank renewed its lease for 1.1 million square feet at  745 Seventh Ave. Evercore, an investment banking advisory firm, added 95,000 square feet at Fisher Brothers’ Park Avenue Plaza, lifting its footprint there to more than 500,000 square feet.  

Meanwhile, Blackstone, Jane Street Capital and American Express are among top-class tenants reportedly looking for large blocks of space to move or expand in Manhattan.

Experts attribute the renewed Manhattan energy to growing confidence that return-to-office is gaining steam as well as to a wider sense that the city is no longer a “ghost town” nor dangerous except in a handful of areas.

Dan Biederman, president of the Bryant Park Corporation and the 34th Street Partnership, noted, “Our subways and suburban trains are much more crowded than last year. Just today, I almost got knocked over trying to get to the turnstiles at the Rockefeller Center station.”

A leasing boom would also be great news for restaurants in business districts.

Marc Packer, a partner in Avra Group which owns three large Midtown restaurants, called the VTS forecast “extremely important for the health of retail/restaurant business and the basic ecosystem of the city.”

Dino Arpaia, owner of Cellini on East 54th Street, said that it might bring more employees to offices on the two days in the week when he said there are sometimes “zero people” at his restaurant.

He said the return-to-offices trend hasn’t helped parts of East Midtown as much as it has other areas.

“It’s still missing on Mondays and Fridays,” he said.