New York City’s Top Office Addresses Draw Bargain Hunters Amid the Pandemic
Tenants are pursuing lower rents amid greater vacancy, according to a new report
More prospective tenants are touring New York City’s marquee office addresses than before the pandemic due to lower rents and additional vacancies.
That’s according to a recent report from VTS, a real estate management platform. The report found that tenant tours of Class A and trophy office properties accounted for about 70 percent of all such tours in the city from June through October. At the start of the year, they accounted for 55 percent.
VTS attributed this increase in prospective tenant foot traffic for what’s considered the best office space in the city to lower rents and additional vacancies that lockdowns due to COVID-19 have caused. Indeed, the pandemic has emptied offices in the city — and kept them empty. The vast majority of office space in the city remains vacant during the workweek, as does most office space nationwide.
“The rise in availability due to the loss in office-using employment induced by the COVID-19 recession has created an opportunity for tenants to explore Class A spaces that otherwise wouldn’t have been available or were out of reach due to higher costs,” the report said.
What’s more, wave upon wave of sublease space is driving down office rents, particularly in Midtown. Some swathes of space in that premier office submarket are asking far less than what they were prior to the pandemic. Indeed, some space available for sublease has asked as low as $30 a square foot (Midtown’s average asking rent stood at around $90 a foot in summer 2019). COVID has also led to more flexible lease terms, including shorter lengths of commitment from tenants.
All of this is tied to the pandemic, which slammed the brakes on office usage and leasing, and has companies reconsidering how much space they need, even post-COVID.
The VTS report found that demand for office space nationwide was down 56.4 percent from February, before the pandemic started to ravage the economy. The report tracks individual markets, such as New York, as well as most of the new demand overall for office space in that market and six others: Washington, Los Angeles, Chicago, Boston, Seattle and San Francisco.
“This is, by far, the worst contraction in recent history for the office market as businesses grapple with a global pandemic,” VTS Co-Founder and CEO Nick Romito said. “While we started to see some signs of life over the summer, businesses experienced a second wave of uncertainty in October, due to resurgence of the virus, the elections and the markets. We expect it’s going to be a bumpy ride for months to come, although we’re confident in a long-term recovery.”