Manhattan: Commercial Property, Office Space Trends and Statistics for 2015

Posted January 12, 2015

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After suffering the negative impact of the financial recession, the city of New York seems to be back on track with regards to economic and business growth. In particular, the borough of Manhattan is considered the economic engine of this US city. For decades, Manhattan has enjoyed a reputation for being one of the world’s top business locations thanks to positive factors like the relatively low cost of doing business and a highly skilled and educated workforce. All these factors impact the commercial real estate market. To learn more, read through our overview of the local commercial property market and through our insights into the office sub-sector.

An overview of the Manhattan commercial property market

Even during the worst of the recession, the real estate market in Manhattan experienced below-average decline rates. Low unemployment rates have helped keep the local commercial property market healthy, and in fact, 2014 was consider a banner year for the real estate market in Manhattan. A New York Times article affirmed that the recent market rebound has brought transaction levels very close to pre-2008 rates, mainly thanks to the strong performance of the retail and office sub-sectors.

Since 2012, nearly 60,000 new jobs have been created in and around Manhattan, with the vast majority of them being office based. This fact has been consistently boosting demand for suitable office space, generating opportunities for increased activity levels and for the creation of new office developments. In addition, in July 2014 real estate analysts predicted that within the following two years, more than 1.55 million square feet of brand new retail space would be delivered within the boundaries of Manhattan, mainly around Fulton Street and South Street Seaport.

Over the past 12 months, one of the most significant trends in the local commercial real estate market has been the rapidly decreasing availability rates, particularly in areas like Downtown and Midtown. Towards the end of 2014, vacancy rates had decreased by 0.4 points, going from 10.6 per cent in 2013 to 10.2 per cent in 2014. These areas have also experienced consistent increases in rental values, and generally speaking, absorption rates have been higher on a year-on-year basis.

Manhattan office space: recent trends and statistics

During the past year, the office market in Manhattan has benefited from the growth of the creative sector, whose strong performance has offset the relative weakness of other industry sectors that traditionally dominated the Manhattan market, such as finance and banking. An important number of office space occupiers operate in sectors like media, information technology, and advertising. Leasing activity levels are particularly high in areas like Grand Central, World Trade Center, Union Square, and Rockefeller Center.

Vacancy rates are at their highest in Madison / Fifth (12.9 per cent), Financial West (11.4 per cent), and Penn Station (10.4 per cent). The lowest vacancy rates can be found in United Nations (0.1 per cent), Hudson Square (5.5 per cent), and East Side (6 per cent).

Rental rates increased by 6 per cent in 2014, and the forecast for 2015 remains optimistic. Average rents in the borough are in the region of $67 per square foot, with the highest rents being in Greenwich / NoHo ($109.48/sq ft), Madison/Fifth ($101.61/sq ft), Park Avenue ($92.11/sq ft), and Sixth Avenue / Rockefeller Center ($86/sq ft). On the other hand, the lowest average rates belong to City Hall ($36.56/sq ft), United Nations ($45/sq ft), Financial West ($49.5 sq/ft), and Madison / Union Square ($50.53/sq ft).

As for the most important office developments under construction, 2015 will see the completion of a 1.7 million square feet building near Penn Station, and by 2017 nearly 2.5 million square feet will be made available at the World Trade Center.