Armano Real Estate August 2022 Newsletter
Manhattan Office Market Update – The Big Rent Increase?
An improving local economy coupled with increased office occupancy translated into a rebound in office leasing activity for the second quarter (second strongest quarter since 4Q 2019). Manhattan office leasing totaled 8.2 million square feet for Q2 2022, up 66.5% from a year ago and up 6.6% from its five-year Q2 average according to market sources.
Stronger leasing and a lack of any major new inventory additions to the market combined to drive Manhattan’s overall availability rate down 50 basis points from last quarter’s cycle peak of 19.1%, to 18.6% in Q2 2022. Only 23.0% of major Q2 leases (closed deals 50,000+ square feet) resulted in a net occupancy reduction, but this trend has yet to fully take shape.
Manhattan average asking rents of $77.16 per square foot, although up 2.1% year over year, were slightly higher or virtually unchanged versus the prior quarter depending on which market was measured and which market source was referenced.
According to one market source, overall Manhattan rents increased 1.16% quarter over quarter. Midtown rents increased 1.81%, Midtown South rents increased .49% and Downtown rents decreased .67% respectively.
Total employment in New York City reached nearly 4.5 million jobs through May. This represents year over year growth of 353,400 or 7.85%. New York City office using employment climbed to 1.5 million. This is only 6,500 jobs below February 2020 peak levels. New York City office occupancy was 41.0% the first week in August according to Kastle Systems. The overall national office occupancy average of 10 major cities was 44.7%.Armano Real Estate believes that nearly half full offices may be the new normal for the near-term. Although we expect that office usage will steadily increase longer term.
Armano Real Estate has correctly predicted a gradual increase in office rents. And we expect this trend to continue despite recessionary concerns and lowered space usage resulting from hybrid work. We are very encouraged by the positive absorption of space. The lack of any major inventory conditions will help limit supply.
Moreover, we believe that inflationary forces will continue for some time. Thus, we are likely to see continued increases in construction costs and building operating expenses such as energy and labor. Continued cost push economic forces will likely lead to higher office rents in the future.
The New York City economy has proved resilient over the decades. As office usage and employment increases continue, there is a case that can be made for substantially higher office rents longer term.
We, therefore, encourage tenants to proactively use this window of opportunity to engage the market and explore options to best reposition their corporate real estate.
Grand Central Madison
Please read the below regarding the connection of the LIRR and Grand Central. This is largest new train terminal to be built in the United States since the 1950s and the first expansion of the LIRR in more than 100 years.
https://www.nbcnewyork.com/news/local/lirr-proposes-274-new-trains-with-grand-central-opening-see-the-new-schedules/3717637/
Armano Real Estate expects that this will be a huge benefit for tenants located in the Grand Central area as commuters from Long Island will now have improved access. Please feel free to contact us regarding your current real estate situation. We can provide a no-fee lease review and analysis and a preliminary space program to help meet your back to work plan and corporate real estate vision. Please see the below link for recent news announcements and our newsletters:
Armano Real Estate Returning to the Office:
Armano Real Estate Returning to the Office
Please see the below links for NYC recovery index:
NYC Economic Recovery Index
Please see the below links for NYC COVID results:
Positive COVID-19 Results by Region
Please see the following link regarding HealthCheck360 COVID-19 Workplace Solutions:
HealthCheck360 COVID-19 Workplace Solutions
