Although the U.S. economy overall, as measured by payroll employment, has grown at a moderate pace since the job recovery began at the beginning of 2010, some cities have boomed while others have lagged. In general, cities that have a large proportion of their employment base in either technology or energy are growing rapidly, while cities that don’t are not performing as well.
The strongest job growth of the past four years has been in technology dominated cities like San Jose, San Francisco and New York or energy dominated cities like Houston, Dallas and Denver. To be sure, there have been some cities that have shown healthy growth that are not dominated by tech/energy employment, like Orlando, and Miami, but for the most part, cities that have a different mix of industries have experienced slower recoveries.
The pattern we are seeing in the nation can also be seen in Manhattan. Of the three major Manhattan markets, Midtown, Midtown South and Downtown, the ones that are performing best are the ones that have a large technology/creative tenant base: Midtown South and, increasingly Downtown.
Midtown South remains the tightest market in the nation with a vacancy rate of 7.9%. Although the Midtown South vacancy rate jumped last year when 51 Astor Place was completed, it has fallen back as much of the space in that building and others was leased. In 2013 a total of 3.5 million square feet was leased in Midtown South and 1.5 msf of that was to tenants in Technology, Advertising, Media and Information, a group of industries that we have dubbed TAMI tenants. That’s nearly 42% of all new leases signed last year and by far the largest TAMI leasing share of any market. In Downtown, TAMI tenants accounted for about 22% of new leases and in Midtown the share was roughly 20%.
The growth in demand from creative tenants is great news for New York. Since the jobs recovery began in New York City at the end of 2009, employment in the TAMI industries has increased by more than 56,000 jobs. Over the same time frame, employment in financial services is up only 12,400 jobs.
As the national economic recovery gains momentum in the months and quarters ahead, the diverse New York City economy will only benefit as demand for other services, from legal to accounting and yes, financial increases, while the TAMI sectors continue to expand. The result will be a stronger local economy and a vibrant more vibrant real estate market.