The New York City Real Estate market has continued its rebound through April 2025. Manhattan’s office leasing activity reached 12.2 million square feet in Q1 2025, the highest since late 2019, indicating strong demand for office space. In April alone, leasing activity totaled 2.47 million square feet, 45% above the five-year monthly average, bringing the year-to-date total to 10.35 million square feet, a 46% increase from the previous year. Additionally, the market saw a positive net absorption of 1.34 million square feet in April, contributing to a year-to-date total of 4.34 million square feet.
A 10% baseline tariff on most imports went into effect on April 5th. Additionally, 25% sector specific tariffs also went into effect starting March of this year. Tariffs on 57 trading partners have been suspended until July 9, 2025, as tariff deals are being negotiated. China faced a 145% tariff. However, a 90 day pause is in effect lowering the tariff rate to 30%.
It is unclear whether tariffs will significantly slow the office market recovery. However, we do expect several effects including:
Increased construction and fit out costs.
Tariffs on materials like steel, aluminum, and glass raise the cost of construction and tenant improvements. These increased costs could eventually lead to higher rents as landlord pass costs onto tenants.
Decreased Business Confidence
Tariffs create uncertainty and may squeeze margins. Therefore, companies may delay office leasing decisions or opt for flexible leases instead of long-term commitments.
Inflation
Tariffs can contribute to overall inflation, including operating expenses (utilities, maintenance, supplies). This can strain office tenants’ budgets and lead to lease renegotiations.
Tenants directly hit by tariffs such as the consumer, fashion, retail and construction industries are closely monitoring future expansion plans and are focusing on reducing occupancy expense. Tenants indirectly affected by tariffs are also looking to reduce occupancy expense due to business uncertainty.
Armano Real Estate has been successfully helping tenants navigate the current economic challenges posed by tariffs through effective corporate real estate strategies including lease restructuring, space optimization, relocation, disposition and lease termination.
We are actively encouraging tenants to review their current occupancy expense and space design plans and to seek improvements. We have been extraordinarily successful in tenant and landlord negotiations achieving huge rent reductions and landlord concessions including free rent, tenant improvements and improvements in lease clauses.
Please see our video link below and feel free to reach out to us for a complimentary lease review or space planning consultation.
