Manhattan's office market is experiencing a resurgence, marked by increased leasing activity, evolving work dynamics, and the expansion of artificial intelligence firms.
Post-Pandemic Leasing Surge
In 2024, Manhattan's office leasing volume reached 33.3 million square feet, the highest since 2019. Three major deals include:
Bloomberg expanded its lease by 925,000 square feet at 919 Third Avenue.
Citadel secured a new 504,000-square-foot lease at 660 Fifth Avenue.
Ropes & Gray, a law firm, will occupy 430,000 square feet at 1285 Sixth Avenue.
Shifting Office Dynamics
But if I do a good job, I can still work from home, right? Right?!
The traditional work-from-home model is shifting. Ron Porter, a senior partner at Korn Ferry, describes this change as the "new hybrid hierarchy," where flexible work arrangements have become more selective. He notes, "It's a little bit more selective, more quote-unquote perky. In certain roles, you could see it as that's what it took to get them, or that's what it took to retain them."
Conversely, JP Morgan Chase is bringing employees back to the office five days a week starting in March of 2025. Their brand new office tower at 270 Park Avenue is expected to open this year. We're seeing the same calls for a return-to-office from companies like Amazon, Dell, and also the federal government.
AI Firms Fueling Office Space Demand
Over the past decade, AI companies have significantly increased their presence in New York City, expanding from less than 450,000 square feet to over 4.8 million square feet. Attracted by the city's rich talent pool and innovation ecosystem, firms like OpenAI have established substantial offices in Manhattan. They leased 90,000 square feet in the historic Puck Building in SoHo.
Impact on Retail
The resurgence of office occupancy and growth in tourism is positively influencing retail sectors, particularly laggards like Midtown and the Financial District. As more employees return to high-quality, amenity-rich office spaces, the retail vacancy rate is on the decline. Just 14.7 percent of prime retail space was available from July to September 2024. In 2021, the second year of the pandemic, availability peaked at 28 percent.
In summary, Manhattan's commercial real estate market is rebounding, driven by substantial leasing activities, changing work dynamics, and the growth of AI firms. I expect these trends to support residential prices as workers balance the commute in their home selections.
On the move this year? It would be my pleasure to support your real estate goals for 2025.
Best,
Corey Cohen
Founder
The Roebling Group
646.939.7375
@mrcoreycohen
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