When considering the state of the market, it’s common for real estate professionals to focus on vacant space, as opposed to occupied space. Partially, this could be because occupied can be a surprisingly relative term. For instance, just because space is technically occupied and someone is (hopefully) paying the rent, doesn’t mean that the space is being optimally utilized, or even utilized at all.
The Manhattan commercial inventory today stands at almost 447.2 million-square-feet. (Your numbers may vary slightly; Newmark Grubb Knight Frank includes all office buildings from 65th Street south to the Battery that total more than 20,000 square feet). In any case, New York City’s commercial inventory has reached a record-high, and this represents a significant recovery from the losses of 9/11, as well as the residential conversion of 16.5 million square feet since 1995.
Meanwhile, at the end of January, total occupied space in Manhattan closed at 411.1 million-square-feet. That translates to a current vacancy rate of 8.1 percent—or, better still, an occupancy rate of 91.9 percent.
But let’s consider that underutilization scenario more closely. Approximately 87% of the office inventory for all of New York City lies within the Manhattan boundaries I described earlier. If one were to take all of the (traditional) offices jobs in New York City (approximately 1,252,000) and say that 87% of those positions were in that area, it would equate to approximately 1,089,000 positions, or about 377 square feet per employee.
Now, that metric is most certainly above the current average. Historically, the figure has been around 250 square feet per employee; and that number is falling fast, as a result of densification efforts by employers (and savvy brokers). With this in mind—and even after accounting for tenants that have yet to put space on the market after leasing space in another location, loss factors (or some measurement issues between useable and rentable area) and non-traditional tenants leasing space in office buildings (education and healthcare, for instance)—it becomes clear that a portion of New York City’s commercial inventory is underutilized.
Nonetheless, even taking this underutilization into account, New York City is undoubtedly crowded—and not just with tourists, either. There are a lot of office workers in our fair city these days.
It reminds me of a line that Rock Hudson delivers to Doris Day in Pillow Talk, as he gazes upwards in amazement at the Manhattan skyscrapers of 1959: “all of those buildings filled with people.”
And, for the most part, Rock was right.