Picture the city of Detroit with its 24.52 million square feet of office space. Now picture dropping that 24.52 million square feet right into the middle of Manhattan.¬†¬†
That is basically what has happened over the past decade. The nearly 26 million square feet of new or ‚Äúdramatically renovated‚ÄĚ1 office inventory added to the Manhattan office market in that time span is on a scale larger than many secondary cities.¬†
Now imagine over the next five years, dropping an additional city like Phoenix, measuring 20.40 million square feet, into the Manhattan market. Because that is nearly how much of future office inventory is scheduled for delivery in Manhattan between 2020-2024 (22.44 million square feet).
As tenants evaluate their office needs and companies look to capitalize on the efficiencies and aesthetics of new office construction, Colliers took a deeper look into Midtown, Midtown South and Downtown to see exactly how much office product will be delivered, when will it be delivered, how much has been pre-leased and what similarities/differences can be found.
Unsurprisingly, the growing Hudson Yards/ Manhattan West submarket within Midtown South alone will provide nearly the largest share (35%) of the new office construction in Manhattan between 2020-2024.¬†
Although limited to four office buildings with no delivery scheduled in 2020 or 2021, these four buildings will add a total of 7.78 million square feet to the market.¬†
Three of the four office buildings have at least 2 million square feet of rental office space, including Two Manhattan West, 66 Hudson Boulevard and 50 Hudson Yards.¬† Approximately 25% of the total space has been pre-leased to tenants such as BlackRock, Pfizer and AllianceBernstein.¬†
Outside of Hudson Yards/ Manhattan West, the remaining seven submarkets that form Midtown South ‚Äď stretching from south of Bryant Park to Canal Street ‚Äď will represent approximately 37% (8.32 million square feet) of the new or dramatically renovated office product scheduled for delivery between 2020-2024.¬† Although totaling a whopping 22 buildings, most of these will be smaller in scale, averaging 378,000 square feet. In fact, only three buildings will measure more than 1 million square feet (550 Washington Street, 261 Eleventh Avenue and 1 Madison Avenue).¬†¬†
Other notable buildings in this market include 124 East 14th Street, 799 Broadway, 341 Ninth Avenue and the two Essex Crossings buildings at 145 Delancey Street and 155 Delancey Street. Of the 8.32 million square feet scheduled for delivery, approximately one-fifth has been pre-leased stemming mostly from Google‚Äôs 1.30 million-square-foot commitment at 550 Washington Street.
With five buildings totaling 4.77 million square feet, the Midtown market will be responsible for 21% of the 2020-2024 office deliveries in Manhattan. These buildings include One Vanderbilt, 270 Park Avenue, 425 Park Avenue, 303 West 42nd Street/300West 43rd Street and 106 West 56th Street.¬†
The new Midtown inventory will have an average size of nearly 1 million square feet with One Vanderbilt and 270 Park Avenue well above that average. Interestingly, these buildings will seemingly come online all at once in 2020. Only 270 Park Avenue is scheduled for after 2020.¬†¬†
However, not much of the 4.77 million square feet of new construction coming to Midtown is available. More than 75% has been pre-leased or pre-committed to tenants such as TD Bank and The Carlyle Group signing leases early at One Vanderbilt, Citadel pre-leasing more than half of 425 Park Avenue and JPMorgan Chase planning to simply occupy its owned building at 270 Park Avenue.
After delivering millions of square feet of new product in the last decade at the World Trade Center and 200 West Street, Lower Manhattan will contribute only 7% (1.55 million square feet) of Manhattan‚Äôs new or dramatically renovated office stock between 2020-2024.¬† These six buildings are currently scheduled for delivery next year or in 2021.¬†¬†
The Lower Manhattan future office product will include mostly ‚Äúboutique‚ÄĚ office buildings such as 74 Trinity Place, 15 Laight Street and 25 Park Row with an overall average office RSF of 258,000 square feet. The planned renovation at 100 Pearl Street (formerly known as 7 Hanover Square) is the largest project measuring nearly 1.00 million square feet. Of the 1.55 million square feet scheduled for delivery, slightly more than 50% remains available.¬†
The pre-committed spaces in the inventory includes the base of Trinity Church‚Äôs owned building at 74 Trinity Place that will be reserved for the Trinity‚Äôs offices.¬† In addition, New York City Health & Hospitals pre-leased more than 500,000 SF at 100 Pearl Street.
The Manhattan office market has undergone an amazing transformation over the last decade. Not many other major metropolises can withstand the influx of new product that is akin to scattering an entire secondary city across its geographic boundaries.¬†
The next several years will be no different. But each of the three Manhattan office markets, along with Hudson Yards/Manhattan West, will contribute to the inventory with very different product in varying spurts.¬† It will be interesting to see where tenant demand is strong and which tenants are attracted to these future buildings that will redefine the constantly evolving Manhattan skyline.
1¬†Note: ‚ÄúDramatically renovated‚ÄĚ refers to office buildings renovated on a scale that requires the building to be vacant or nearly vacant during construction.
Frank Wallach is Senior Managing Director of the Research Group for Colliers International Tri-State. For questions about the data in this article, please email Frank or call him at (212) 716-3603.¬†