Office Space News
Office space in Midtown Manhattan
Published November 18th, 2008 by Mike Sullivan
I spent the day visiting office space in Manhattan yesterday, much of which was in the Midtown area. This area is a driving force and bellweather in the New York office rental market. Encompassing areas such as Penn Station, Times Square, Park and Madison avenues, there are no better known commercial real estate markets in the world, and there are probably 50 (or more?) executive office suites in the area. I personally walked by 35 or so that I knew of (and visited a handful).
The grim news is that CB Richard Ellis is reporting a drop in occupancy in this area, known consistently as one of the strongest markets in the US. While the drops are not as big as others around the country percentage-wise, the number of square feet is quite large. There were 4 spaces of 100,000 square feet or more that opened up in October.
This will place continued pressure on executive office suites, and while many will suggest current economic trends will give office suites a boost, most operators are always hopeful of a strong and expanding market. Operators I have talked to say that while they are benefitting from increased inquiries from those looking to take on less costly or smaller space, they are not getting much interest from companies looking to expand. What’s worse, though, is that they are losing clients due to defaults.
Visit The Real Deal For more information about trends in Midtown Manhattan office space or visit CB Richard Ellis for reports about commercial office space trends.
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About the Author
Rob Zeus November 18th, 2008 at 8:47 am
I was up in Manhattan in April… my how things have changed. I hate to see the bleeding, especially in one of the prime markets in the nation. That’s a bad sign. We have to keep in mind, though, that there were a lot of major companies tied to the financial industry that may be driving those numbers up. It would be interesting to drill down and see who actually vacated the space. How does this affect serviced office rentals? I’ve never seen data on that. I would guess in a market like Manhattan it wouldn’t bode well because folks who might otherwise use an executive suite may get bargain leases on traditional offices.
Maggie Correta November 19th, 2008 at 4:37 am
The market is going through a bit of a shakeout in some cities. Too much office space was developed too quickly, and now it’s sitting dark. I can’t see that as a benefit for serviced offices because, like Rob said, folks might look for bargain basement deals on leases instead of turning to executive offices. That’s where the quality executives suites win out. It’s the amenities that you don’t get with a traditional office rental that will make a difference.
Mike November 19th, 2008 at 5:08 am
After having spoken with several executive office suite providers in New York, they all said the same thing: executive offices in New York are slowing but most are still relatively full. One said that since there are so many companies needing different types of space, they are still seeing some new activity. But the real point is that it’s a slow degradation of the market and they’re definitely not on the upswing or holding steady. They would like to see things turn around, or level off soon.
Marcus Hester November 19th, 2008 at 1:01 pm
Mike - I imagine that’s the sentiment of the entire office industry, whether it’s executive offices or traditional office leases. When I talk to developers in big cities, they tell me that they are looking for a large number of smaller tenants rather than a handful of large tenants so they can spread the risk. It seems the serviced office industry is already living by that mantra and may do better through the economic storm because of it.
Bill Brookshire November 25th, 2008 at 9:11 am
Could it be that as New York goes, so goes the rest of the executive office suites market? Maybe to some extent, but like everything else, there are surely pockets in the serviced office industry that defy the standard. It’s often the truth, as well, that the first to see the effects of the down cycle are also first to recover. In any case, it’s interesting to keep an eye on Midtown Manhattan’s office rental market.