Could the era of squeezing more and more workers into every square foot of office space be coming to an end?
“Densification” has been the word on the tips of dealmakers’ tongues in the office market in recent years as tenants switched from layouts focused on individual offices toward more open plans requiring less space.
But that trend may be reversing. Tenants that inked deals in new construction on the Far West Side last year took more space than they left behind, according to Cushman & Wakefield.
Companies leased 8.3 million square feet in Hudson Yards and Manhattan West, leaving behind about 7 million square feet, Cushman head of research Rich Persichetti said during the firm’s year-end market update Wednesday morning.
Asset manager BlackRock, for example, signed a lease last year for 850,000 square feet at the Related Companies, Oxford Properties Group and Mitsui Fudosan America’s 50 Hudson Yards. The company currently occupies 700,000 square feet in two buildings on Park Avenue and East 52nd Street in the Plaza District.
BlackRock pledged to add 700 new jobs on top of its current 2,700 employees over the next decade in exchange for $25 million in state tax credits attached to the deal.
Louis D’Avanzo, the managing principal for Cushman’s Midtown office, said that some companies have squeezed as many workers as they can into their offices, and are now finding a new normal.
“In some ways, the pendulum may have swung too far to one side of the open space, really dense [office],” he said. “I think there’s more data coming back that not all jobs and functions work well in a completely open, dense environment.”
Ken McCarthy, Cushman’s principal economist, said one reason for the switch toward more space could be the simple fact that the economy is growing and these companies are adding more jobs.
“I think it’s a little early but I think it’s a possibility that going forward we may see less [densification],” he said.
McCarthy said New York City added a net of 53,000 jobs in 2017, a year he called a “mixed bag” in terms of job growth.