With every new Manhattan office report of late, the good news flows like lava.\u00a0\u00a0<\/p>\n
Leasing volume was up 2.3 percent in the third quarter from the same time last year. Vacancy was at 12.6 percent \u2014 the lowest level since before 2020 \u2014 down from 13.1 percent at the end of the second quarter and from 14.7 percent last year at this time. Direct asking rent was up to $84.56 per square foot, with rents over $300 no longer a rarity and $400 per square foot in the market\u2019s sights<\/a>.\u00a0<\/p>\n SEE ALSO: Law Firm Seward & Kissel Signs 171K-SF Renewal at One Battery Park Plaza<\/a><\/p>\n And, these metrics were \u201cbroad-based across major industries,\u201d according to JLL<\/a>, indicating that the current success of the office sector is not reliant on any one segment of the market.\u00a0<\/p>\n The current health of Manhattan\u2019s office leasing can be seen not just in the big picture numbers, but also in the size and duration of some of its biggest office deals and leases this year.<\/p>\n While Commercial Observer\u2019s Office Deal of the Year<\/a>, the 2 million-square-foot, 55-story deal for American Express to establish its new global headquarters at 2 World Trade Center, is not a lease, as American Express will solely own the building, it is a strong indicator of the company\u2019s faith in the future of New York<\/a> as the business world\u2019s central hub as well as a notable addition to the city\u2019s office landscape.\u00a0\u00a0<\/p>\n Beyond that, this year has seen law firm Simpson Thacher & Bartlett sign for 916,000 square feet over 26 of the 29 stories at Extell Development\u2019s 570 Fifth Avenue, Bank of America add 600,000 square feet<\/a> to its existing 1.8 million square feet at One Bryant Park over a 20-year term, and Anthropic ink a full-building deal<\/a> for 330 Hudson Street.\u00a0\u00a0<\/p>\n The only seemingly potential dark cloud on the horizon for Manhattan office leasing is a lack of supply. It has roughly 7.9 million square feet currently under construction and expected to come online between 2028 and 2032, but much of that space is already pre-leased.<\/p>\n Yet, despite all this, the world seems rife with domestic and geopolitical uncertainty, including economy-shaking factors including rising Treasury yields and interest rates, never mind tariffs and war, leading to an economy that at times seems not so much built on a solid future-focused foundation as on occasionally defying reality.\u00a0<\/p>\n Given all this, it\u2019s worth asking whether it makes sense to believe that this is really the beginning of long boom times for the office sector.<\/p>\n Nicholas Farmakis, vice chairman at Savills<\/a>, believes that despite these factors, the economy is exactly where businesses want it to be from a macro perspective.<\/p>\n \u201cThere\u2019s sort of two economies,\u201d said Farmakis. \u201cThere\u2019s the asset-based economy, which New York kind of runs off of, and then there\u2019s the average U.S. citizen economy. There may be a bit of a spread there, but as far as the folks in New York, on a macro basis, the economy is doing well. Consumer spending is relatively high. The stock markets are at or close to all-time highs. Venture funding continues to flow. There are a couple of sort of cloudy spots on the horizon as there always are, but as of now, everything\u2019s firing on all cylinders.\u201d<\/p>\n Farmakis added that in the midst of all this, New York City remains as desirable a home base as ever for the business community.<\/p>\n \u201cFrom a recruitment, retention and building a business standpoint, New York is where people want to be,\u201d said Farmakis. \u201cWhether it\u2019s finance, tech, legal, nonprofit, fashion, media \u2014 by and large, New York City remains the center of the capitalist universe.\u201d<\/p>\n A recent report from independent economic advisory firm Oxford Economics confirms just how true this is.\u00a0<\/p>\n Oxford Economics\u2019 2026 Global Cities Index<\/a>, which ranks the world\u2019s 1,000 largest cities on a variety of benchmarks, ranked New York\u2019s economy as No. 1 with a $2.6 trillion GDP, while projecting that the city would add $3.8 trillion in GDP between 2025 and 2050, the largest projected increase of any city on the planet.\u00a0<\/p>\n Neil King, vice chairman at CBRE, believes the broad range of industries experiencing growth here is just one reason for optimism about the ongoing state of the market.<\/p>\n \u201cOne of the biggest positive attributes we\u2019re seeing now versus even two or three years ago, when we started to see a real uptick in the leasing market, is that the entire universe of industry base in New York seems to be growing,\u201d said King. \u201cBig tech has woken back up and is looking to expand incrementally, and that\u2019s in addition to the obvious financial and law firms that have been leasing a lot of space over the last three years. Every industry seems to be growing, which has certainly helped buoy the market over the last two years.\u201d<\/p>\n Elecor Properties<\/a> (formerly Paramount Group) owns an extensive Class A office portfolio in New York, including 60 Wall Street, 1301 Avenue of the Americas<\/a> and 1633 Broadway, to name just a few.\u00a0<\/p>\n Peter Brindley, the firm\u2019s head of leasing, cited this diversity of occupancy as one reason for the firm\u2019s current leasing success, including a 91.6 percent occupancy rate in New York City as of the end of the second quarter.\u00a0\u00a0\u00a0\u00a0<\/p>\n \u201cWe\u2019ve had 11 consecutive quarters of leasing activity that exceeds the five-year quarterly average, which just continues to accelerate, and eight consecutive quarters of positive absorption,\u201d said Brindley. \u201cI think the diversification of the city\u2019s tenant base over the last decade or so has been underappreciated. Manhattan is in a league of its own in that it appeals to leaders across a very diverse range of industries, which is a huge advantage for our market.\u201d\u00a0<\/p>\n Another aspect of this success is that the office sector has benefited from the widespread rejection of work-from-home policies adopted during the pandemic.<\/p>\n \u201cPeople are working three, four, five days a week back in the office. That\u2019s not even a discussion anymore for people in the market,\u201d said King. \u201cIf you\u2019re in New York, you\u2019re in the office, whatever the new cadence is.\u201d\u00a0<\/p>\n Matt Astrachan, vice chairman of brokerage for JLL, agrees, noting how this ties in with the stiff competition in the corporate world for top talent and the office demands of top performers.<\/p>\n \u201cThere\u2019s a fierce fight at the top end of our market for highly sought-after, talented folks, with everyone saying, \u2018I want the best of the best,\u2019\u201d said Astrachan. \u201cEvery industry from banks to tech to insurance to law said, \u2018We want everybody back for five days,\u2019 and employees across all industry segments are responding, \u2018That\u2019s fine, but I want my own spot.\u2019 That\u2019s led to a lot of \u2018uh-oh\u2019 moments due to insufficient seat counts. Expansions not tied to lease expiry are going on all over town. I think that\u2019s fundamental.\u201d<\/p>\n Astrachan also noted that it\u2019s this demand for top talent, and therefore more space, that\u2019s helped rent levels skyrocket at the top of the market and then down throughout the office class hierarchy.<\/p>\n \u201cI\u2019ve been doing this for almost 40 years, and I never thought we would see rents like this in my lifetime,\u201d said Astrachan.\u00a0<\/p>\n Given all this, there aren\u2019t many factors spooking commercial real estate executives from holding a pronounced optimism about the New York office market going forward.<\/p>\n