I was pleased to participate in a fascinating report just released in Fast Company. While titled as an eight-point guide for designing an office that office workers actually want to return to, it also contained a discussion of the state of the office market in several major cities and the views of several real estate experts. As part of that article, I detailed the major changes that have occurred as landlords are now willing to make significant concessions.
“There’s probably never been a better time to be a tenant. The market is in a new stage of being reset. Landlords are reducing their rents significantly, they’re increasing their work allowances significantly, and also increasing the free rent period. . . . I’d say the numbers for tenants have improved 30% since 2019. You can expect on a raw space [in a class A building in New York] that you will get a work allowance of about $130 to $150 a square foot, which is what is required to build a space. On a 10-year lease—and a 10-year lease is required for a build out—you would get 12 to 15 months of free rent.
In the past landlords build out offices to 80% of cost. They’re now building it out up to 100% of cost. Or they will throw in some additional things. They’ll put in the marble reception area, when before it would have been a carpeted reception area. And a lot of the major landlords are building amenity centers, which is a huge cost for them.”
The article correctly points out that in New York City there is considerable demand in Midtown for top buildings located near mass transit hubs Grand Central Station and Penn Station, making commuting from the suburbs easier. The flip side of that is the downtown financial district is suffering due to its distance from those hubs requiring an additional subway ride, but also offers great values.
The bottom line is tenants have more opportunities and choices than ever before, and they are in the driver‘s seat. Let Wharton Property Advisors assist your company in navigating today’s complex office landscape. We can help you best take advantage of the many excellent bargains on offer in NYC.
Thank you,
Ruth Colp-Haber
Partner
Counselor of Real Estate
Fellow of Royal Institution of Chartered Surveyors
