New York Office Market Continues To Languish

USA – Over two years into the COVID-19 pandemic, office vacancy levels are still high and asking office rents are dipping in one of New York City’s top business districts, reported The Politico on Monday evening (1 August, SGT).

According to a report from the Alliance for Downtown New York, office rental activity in the city for Q2 2022 plunged 31 percent compared to the preceding quarter. It also remained 45 percent lower than its quarterly average over the past five years.

In addition, more than 20 percent of the office space in Lower Manhattan was unoccupied during the 2nd quarter, said the non-profit organization that oversees the Downtown-Lower Manhattan Business improvement district. The group cited data from real estate consultancy Cushman & Wakefield (C&W).

Aside from that, the April to June period marked a record in which the overall vacancy levels for all of Manhattan’s three office submarkets – Midtown, Midtown South, and Lower Manhattan – surpassed the 20 percent threshold. At the same time, average asking office rents in Lower Manhattan fell 5.5 percent year-on-year to US$56.80 psf per month.

“Office leasing activity was certainly slower than expected this past quarter and it’s too soon to say if it was a temporary setback or if it reflects a new baseline in the evolving landscape,” said Jessica Lappin, President of the Alliance for Downtown New York.

“We have however seen continued demand on the residential front and a response from the real estate community to kickstart conversions on at least five properties within the district to meet that demand,” she added.

The report named commercial properties poised to be converted for residential use or those that may hold some potential to become apartments. These included a 30-storey building at 55 Broad Street that is set to become a 571- unit residential project.

Another one is 40 Fulton Street, an office building put up for sale by Vornado. It is speculated to be turned into a residential building due to its smaller floor plates and good access for natural light, while another office building, 25 Water Street, also seems slated for residential conversion, stated the report.