New York City’s office construction boom is over, due to record vacancy rates

• Manhattan is experiencing an enviable amount of construction on the office buildings that define its skyline.
• However, the opening of large office buildings in the borough will slow after 2025, according to the Times.
• Rising construction costs and the effects of increased remote work are playing a role in this shift.

Over the past 25 years, New York City has endured a number of unprecedented economic challenges, from the aftermath of the September 11, 2001, terrorist attacks to the devastation of the COVID-19 pandemic.

But one thing has remained constant in Manhattan for a long time. It is the construction of large office buildings that define the skyline.

But many of New York City’s most ambitious office projects are on hold for now, and the New York Times reports that the city may not see a significant number of large office towers open until the 2030s.

Only a few large office buildings of more than 500,000 square feet are scheduled to open in 2024 and 2025, according to the Times. Beyond that period, few projects are scheduled to be completed by the end of the decade. According to the newspaper.

Rising construction costs and rising office vacancy rates are expected to slow the proliferation of large office buildings in areas such as Midtown Manhattan and Lower Manhattan, which have long been home to powerful companies.

According to the Times, nearly 20 large office buildings proposed for construction have yet to be shoveled into the ground to start the projects.

There are also contract issues with anchor tenants who are committed to occupying hundreds of thousands of square feet of office space.

One of the final highlights of the new World Trade Center complex, the long-planned Second World Trade Center, has so far failed to find an anchor tenant for the building, according to the Times. However, construction has not yet begun.

For developers looking to lease large-scale buildings, there are no major employers on the market looking to move out of their current spaces, the newspaper said.

For some companies, remote work has also gradually diminished the need for the large physical footprints that were common in Manhattan before the pandemic.

“It’s hard to justify putting shovels in the ground when the supply and demand fundamentals are crazy,” James Miron, president of CBRE U.S. Fixed Income and Structured Finance, told the Times.

So while construction cranes have been rising everywhere in Manhattan for more than two decades as residents have flowed into the borough, a slowdown in office construction will have a significant impact on the local economy.

More than 52 million square feet of office space has been built in Manhattan over the past 23 years, according to CBRE, a real estate services and investment firm. This number reflects New York City’s confidence as one of the major economic centers in the United States and the world.

However, 17.9% of Manhattan’s office space remained on the market at the end of the third quarter of 2023, a record high, according to a report released by real estate brokerage Colliers.

Many areas of the city are still recovering from the pandemic. Additionally, property taxes from office buildings typically bring in significant amounts of money to city coffers each year, so a slowdown in office construction could threaten the city’s ability to fund a variety of services for residents. There is.

The new JPMorgan Chase Building, whose final steel frame went up last month, is one of the buildings the city is touting as a sign of its continued status as a global business powerhouse.

Located at 270 Park Avenue, just steps from Grand Central Terminal in midtown Manhattan, the 60-story building will serve as the world headquarters for JPMorgan Chase and will be home to approximately 14,000 employees when it opens in 2025. will be placed. The statement said this large-scale project resulted in the creation of 8,000 construction jobs, an important economic driver for such developments.

There is also the issue of converting office buildings into housing. This is a key priority for housing advocates and lawmakers in a city hungry for affordable housing. Manhattan has one of the highest income disparities of any jurisdiction in the nation, and many policymakers have rallied behind housing transformation as a way to keep working and middle-class New Yorkers in the city. ing.