The share of builders in New York City crazy enough to build large office towers has dropped to 30-year lows with only a handful of contenders.
There are only three office projects spanning at least 500,000 square feet in the city’s development pipeline, with two expected to open in the next couple of years, according to JLL data reported by the New York Times.
There could be more in the offing, but roughly 20 sizable projects that have been proposed are stuck at one stage or another and yet to break ground. Rising construction costs, elevated interest rates and a changing office culture all but guarantee some of those projects will never see the light of day.
Manhattan is facing its most dire office construction drought in decades, dating back to the savings and loans crisis of the late 1980s and early 1990s. There may not be another wave of office tower developments until the next decade at the earliest as builders size up the changing market dynamics.
“It’s hard to justify putting a shovel in the ground when you have supply-demand fundamentals that are out of whack,” said James Millon,” CBRE president James Millon told the outlet.
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The builders who are moving forward with office developments are banking on demand from tenants willing to pay a premium for modern, amenity-rich office space.
The fundamentals of the office market aren’t doing developers any favors.
At the end of November, Colliers recorded an availability rate of 18 percent across Manhattan office space, the highest vacancy rate recorded since the turn of the century. The average asking rent was $75 per square foot, about a third of what developers would need to charge to make offices a worthwhile investment.
— Holden Walter-Warner