Manhattan’s office availability rate climbed to 14.3 percent at the end of October, but the figure could be several points higher when factoring in shadow inventory in the flex-office market.
That’s according to a new report from CBRE, which found that flex-office firms like WeWork, Knotel, IWG Convene and others take 13.4 million square feet of space in Manhattan, but have been strained during the pandemic.
Firms across Manhattan have been slow to bring workers back, contributing to the larger so-called shadow inventory, which is essentially leased office space that stands empty. Flex-office space members have likely been reticent to return.
A CBRE research and analysis team focused on what impact remote work was having on those flex-office providers. As of November, the firms comprised 4 percent of Manhattan’s 414 million square feet of overall office space.
The team’s director, Nicole LaRusso, said the report focused on “unutilized flex space” to see whether in the larger office market “there was actually more available space than our regular metrics would show.”
Since the pandemic emptied out office buildings in Manhattan, flex-office providers have closed numerous locations but the ones that remain open are also suffering.
CBRE estimated that if a quarter of that existing flex-office space is now unoccupied, Manhattan’s overall availability rate would rise to 15.1 percent. It would climb to 15.9 percent if half of that space was empty and would jump to 17.5 percent if 100 percent of the flex-office space was unoccupied, according to CBRE’s analysis.
As it stands now, Manhattan’s 14.3 percent office availability rate is about where it was at the peak of the Great Recession.
CBRE estimated that in the Manhattan office buildings it manages, physical occupancy has plunged to roughly 12 percent, LaRusso said.
The report found that the diminished level of flex-office space utilization presented both an opportunity and a challenge for the Manhattan market. Tenants looking to preserve cash and test out post-pandemic workplace strategies likely have more options to consider.
“But landlords could see increasing levels of flex space returned to the market, adding to the inventory of available space at a time when overall demand remains low,” the report noted.
Keeping track of unused space, according to CBRE, is “important to gauging the overall health of the Manhattan market.”