New York Market Overview

Office:

Last year, Law firms leased 3 million square feet in Manhattan. Daily attendance of law firms is 65%. Law firms are leasing 40% less space or an average of 600 square feet per lawyer.

Rents for prime office space in New York City peaked at the beginning of last year but dipped over the next three quarters.

Average effective rents for prime Class A office space which includes new construction, trophy and recently-renovated buildings peaked around $105 per square foot in the first quarter of 2023. That was up 19% from the same time in 2019.

Average effective rents, which factor in the concessions that tenants score from landlords, started to drop in the second quarter. They continued to ebb, finishing the year at around $88 per square foot.

The lengths of office leases, meanwhile, are down overall but are recovering faster for prime Class A buildings. Office leases inked for regular Class A buildings suffered the biggest drop, falling to an average of 125 months from a pre-pandemic 154.

Office landlords across the board are striking deals to attract tenants without lowering the nominal rates often demanded by mortgage covenants. Concessions remain well above pre-pandemic levels, especially in Prime Class A buildings, and made up about 12% of the total deal value in 2023.

The quest to fill up empty commercial space has led landlords to repurpose offices as film studios or self-storage units. After years of mounting expectations, residential conversions are finally picking up steam, but it’s going to be a long trek.

Rents for top tier office space have increased since 2019. In older and less luxurious buildings, leases have become shorter and cheaper.

This corner of growth comes as the return-to-office trend seems to find its line: two or three days in the office, and two or three days remote. The hybrid model also lends itself to enterprises picking up small satellite spaces, especially for workers who aren’t within commuting distance of headquarters.

On the road to an office market recovery, the city is approaching a pair of milestones. Office attendance is rebounding to nearly 80% of its pre-pandemic number. New York is among the top-performing markets by that metric, with workplace visitations for 2023 at 77.5% of 2019. It was also a big step forward from the previous year, as foot traffic jumped by over 30% compared to 2022. The city still has a long way to go, but things are much worse in the rest of the country.

Nationwide, office attendance is down around 33% compared to pre-pandemic levels on Tuesdays, Wednesdays, and Thursdays. Mondays and Fridays bring a drop of almost 50%.

Only the strictest of return-to-office employers are using the same amount of office space that they were in 2019, while many have been able to slash their footprints with a hybrid model. Even as the return-to-office movement has progressed, office owners are not feeling any relief.

The availability rate in Manhattan hit a new record high in February at 18.2%, bringing us to our other fast-approaching milestone: 100 million square feet of available office space.

Total office absorption across the borough’s major office districts was negative 1.43 million square feet, bringing the total available office space to 98.05 million square feet.

Retail:

Dumbo Market signed a nearly 14,000 SF lease in a new development in Long Island City at the Jasper, a 499-unit rental building being developed by The Domain Cos., LMXD, the Vorea Group and Bridge Investment Group.

Continuum gym has signed 25,000 SF at 666 Greenwich Street in the Archive Building.

DXL Big + Tall is relocating and signed a 10,000 SF lease for a corner storefront at 675 Sixth Avenue.

City Roots Hospitality signed a new 10-year lease at 37 West 19th Street in the Flatiron for 4,300 SF. Mexican restaurant.

Ferrari, the luxury car company, signed a new lease in the Soho building at 92 Prince Street in Soho for 3,700 SF, taking over Forever 21’s old space.

Avra Estiatorio signed a new 20-year lease in the Farley Building, 390 Ninth Avenue, Penn Plaza, for 20,000 SF.

Arc’teryx rented 12,689 SF at 600 Fifth Avenue.

Butterfield Market rented 10,055 SF at 29-17 40th Avenue in Long Island City.

ENT and Allergy Associates rented 10,000 SF at 35-30 Francis Lewis Boulevard in Flushing.

60/60 Optical, an optical store, signed a new 10-year lease at 1623 Flatbush Avenue in East Flatbush for 7,548 SF.

Solaris Health rented 6,000 SF at 35-30 Francis Lewis Boulevard in Flushing.

Deal Hunters signed a new 10-year lease at 3024 Church Avenue in Brooklyn for 5,000 SF.