June 2021
Re-Occupying NYC – Substantial Office Lease Cost Savings
New York City office availability rates reached an all-time high in May 2021. Availability rates across all submarkets and building classes were 18.6% and occupancy rates 13% respectively, at the end of second quarter 2021 according to market sources. Average asking rents were $76.14. This represents a 6.7% decline over the same period last year. Moreover, taking rents were approximately 15.0% lower than asking rents, pointing to continued market weakness.
New York’s City economy continued to improve as the local unemployment declined to 10.8%, when not adjusting for seasonality. The restaurant industry, for example, showed considerable employment gains. Signs of improvement also include daily subway ridership hitting a high since the onset of the pandemic and many companies taking sublet space off the market.
Despite this, NYC’s office usage numbers remain among the lowest in the nation and availability rates continue to rise.
Return to work plans are of utmost importance to employers as the vaccination rollout comes to an end and the economy opens in New York. Armano Real Estate expects a large part of the workforce to return after the Labor Day holiday and a nearly complete return by the beginning of 2022. We envision a scenario where a full return of the workforce, increased hiring and greater than expected business spending and activity leads to positive absorption of space, lower availability rates and increases in rents in 2022 and beyond.
As discussed in our April Newsletter, we are not expecting most employees to work from home 100% of the time. We expect there will be a general return to the office in a hybrid model. Many companies will opt to keep same desking which will help stabilize space demand. Companies that opt for desk sharing or no desking, will need to offer more collaborative and meeting space which will offset part of the space demand decrease from sharing or eliminating desks. Finally, we expect occupiers to adopt space plans with more distance between employees, as less dense offices are perceived as safer in a post-Covid world.
While we expect a robust economic recovery, by early 2022, the office market recovery may be more tapered. We expect a 10-15% or more decrease in structural demand for office space resulting from the continuity of work from home trends. However, we believe there will be a significant recovery and demand for space will remain healthy.
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.
Please feel free to contact us regarding your current real estate situation. We can provide a no-fee lease review 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:
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