Putting a Dent in Availability
The latest figure for all Class A space now on the market in Manhattan is 36.1 million square feet, for an availability rate of 12.2%. If that sounds like a lot, consider that there is 296.9 million square feet of inventory from 65th Street south to the Battery. (Despite almost 20 years spent conducting research of the New York City market, I am still amazed that so much office space sits on so little land.)
Total Class A availability declined rather substantially in the first two months of 2014, easing by 726,000 square feet. That said, it remains higher than it was during almost the entire “great recession,” except for the tail end when it hit 38.1 million square-feet in June 2009. In addition, the total square footage available only topped out in April 2013, at 40.7 million square feet. Of course, by itself, total availability cannot explain a growing or shrinking market. . And Manhattan is most definitely having growth spurt: Class A inventory has jumped to 297.0 million square-feet from 281.2 million square-feet in just the past five years.
Class A direct availability remains stubbornly high, especially in Midtown, the largest of the three major submarkets, at 30.4 million square feet. It has been stuck within a roughly 2.0 million-square-foot window since September 2011, and is, on average, about 10.0 million square feet higher than it was even during the recession. One quick caveat here – there was assuredly a certain amount of “hidden space” that was never officially marketed during that time. In any case, the Manhattan Class A segment today still has about twice as much direct space available as it did prior to the downturn.
Class A sublease availability, meanwhile, has taken quite a dip, falling back in line with pre-recession figures. It closed the latest month at 5.7 million square feet, down from 6.4 million square feet at the start of 2014 and half its recent record high of 13.4 million square feet in May 2009. That should be good news for landlords, though maybe not so much for tenants.
Looking ahead, new office construction is primed to take a little breather for the next 12 to 15 months. That said, tenants planning to move into new buildings coming online out to 2017 (Time Warner, for instance) may see their old space hit the market in that time period. Another item affecting the Class A market is the demand, whether due to location or cost, for Class B or even Class C property by ever-growing tech firms. Finally, tenants continue to search out further space efficiencies. As a result, it will take a significant pick-up in office job growth to put a dent in the Class A availability number.