New York Office Market Struggles as Availabilities Stabilize
As the broader economy continued to defy expectations heading into the first half of 2024, knowledge worker/office-occupying jobs begin to soften. This is unwelcome news for the New York office market that was already struggling with weakened demand. The result will likely be a market that will not significantly improve over the next year.
Net absorption was negative for 13 of the past 15 quarters, ending the first quarter at -2.98 million square feet. Meanwhile, average asking rents held stable as landlords attempted to hold rates. However, nominal rents trended downward as increased concessions in the form of free rent, TIs, and overall favorable lease terms lowered effective rents.
On the bright side, new office development in Manhattan dropped sharply, with only 2.1 million square feet under construction as of the first quarter, the lowest level in the past 10 years. The lack of new
supply may help stabilize demand in the mid- to longterm. Nevertheless, tenants will have the upper-hand in lease negotiations for the foreseeable future, with the notable exception of Trophy assets with wellamenitized features, that continue to follow the trend of the overall flight-to-quality.
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