From the March issue: Manhattan is undergoing an office construction burst that promises to be larger than anything seen since the 1980s. There is about 30 million square feet of new office space either proposed, under construction or undergoing major rehabs, according to Colliers International. Although there are major projects in several submarkets, Hudson Yards is by far the largest center of activity, followed by Downtown and Midtown. While a sudden addition of tens of millions of square feet to Manhattan’s office market is shaking things up, approximately half of the 13 million square feet of new construction currently underway is already spoken for.
“In 2015 we saw significant commitments to new construction,” said Frank Wallach, senior director for research at Colliers International.
But whether the market will be able to absorb the rest of that product and another 14.5 million square feet in pre-construction building is yet to be determined. Only 3 percent of the pre-construction space is currently spoken for.
Despite higher prices, new construction offers tenants some key operating efficiencies, said Gregory Kraut, principal at Avison Young. Even with the new office space and a soft start to leasing this year, Kraut said he does not see asking rents dropping. “Although there is still some uncertainty in the marketplace, I don’t see rental rate pricing adjusting downward,” he said.