The consequences of the US economic recovery, coupled with the legacy of recent recessions, are exemplified in New York City’s real estate markets.
New York’s office market is the largest in the US – when taken as a metro area it saw $27.1 billion of big ticket investment deals in 2014. Just 15% of these were cross-border, which is high for the US but low by international standards.
The market saw the completion of some major projects in 2014, most notably the 3.5 million sq ft One World Trade Center. In spite of this, shrinking availability characterises the office market in the wake of recessionary low supply and growing demand in an improving job market.
Areas such as midtown, which are reliant on traditional space users such as banks and law firms, are seeing reduced leasing activity, which has fallen for three consecutive quarters. Some tenants are moving to more affordable locations downtown, attracted by lower rents and tax benefits. Downtown is transforming rapidly, with a growing population, and expanding retail and entertainment offer, making it a desirable place to both live and work.
Tech is an important component of the market. Flush with venture capital, tech companies are operating with a unique set of guidelines that were not previously representative of the typical corporate occupier in Manhattan.
For these tenants, the cost of space is secondary to the pursuit of talent. As a consequence, tech firms are paying top rents for poorer-quality space, simply to have an office in the ‘right’ location.