US Office Market To Recover Slower Than Asia’s
USA – Property consultancy CBRE said hybrid working has negatively impacted office space demand across the world, reported Bloomberg on Monday (26 September, SGT).
“There’s no part of the world that is untouched by the growth of hybrid working,” said CBRE’s Global Chief Economist Richard Barkham.
However, the US office market will likely see a slower recovery than Asia and Europe as the United States started the pandemic with a higher office vacancy level, and long-term demand is forecasted to fall around 10 percent or more, he explained.
Moreover, a research by professors at New York University and Columbia University estimated that weaker demand for office space due to remote work would result in a 28 percent reduction (US$456 billion) in the value of office buildings across the country. In particular, 10 percent of that value would be in New York City alone.
In addition, property consultancies revealed that old office buildings in New York are being shunned by tenants in favour of newer commercial properties.
This is evident along Manhattan’s Third Avenue from 42nd to 59th streets, which is home to a cluster of office towers built from the 1950s to 1980s that have not been significantly refurbished.
Although the overall office rental demand in New York has recovered toward pre-pandemic levels, the amount of vacant office space in the aforementioned strip has reached 29 percent. This not only exceeds the city’s overall rate of 19 percent, but is almost double the rate 4 years ago, said Savills.
The office towers in Third Avenue have become “leave-behind space” rather than the types of commercial property that attract world-class tenants, said Savills Vice Chairman Nick Farmakis.
On the other major finance, tech and law firms have been relocating to the west side of Manhattan, including to office buildings on Park, Fifth and Madison avenues as well as a new mega-project on Manhattan’s far west side.
For instance, KKR & Co. and BlackRock Inc are relocating the headquarters to the Hudson Yards mega-development, while Wells Fargo shifted its New York corporate and investment banking business to the area.