New York City Office Use Is Up, But Not Enormously

New York City is far from the only office market in the country, but it’s one of the most important, housing the nation’s financial and corporate powerhouses. The good news, according to a new Marcus & Millichap report, is that space usage has improved. The flip side, the future remains uncertain because companies more than ever are planning hybrid space strategies.

According to the report, there’s a definite recovery in the works. 

“Office usage as of May stood at 38 percent of pre-2020 counts based on a Kastle Systems utilization survey, exceeding pre-omicron figures and the highest measure since the onset of the pandemic,” Marcus & Millichap reported. Much better than 20%, of course, but this shows that recovery is far from the good old days of three years ago.

And then there’s the upcoming future. “As of April, 78 percent of the city’s traditional office-using employers have plans to implement hybrid workplaces, up from 6 percent before the appearance of COVID-19,” the report said. 

That’s an enormous difference and one that should be a touch chilling with warnings about how different properties might fare. “With less workers expected to be in the office full time, many tenants may favor smaller floor plans and spaces that offer greater flexibility than a traditional office environment,” the firm noted.

Also, there’s a continuing bifurcation in class performance, as “performance gaps between property tiers have emerged as tenant preferences increasingly trend toward amenity-rich stock.”

As far as the shorter term goes, Marcus & Millichap says the city’s employment should expand by 3.9%, with an additional 45,000 workers at traditional office-using employers. There should be another 5.7 million square feet in office deliveries, though by the end of the year that will push citywide vacancy to 17%. Rents will see a 2% increase, with the average marketed rate hitting $57.73 per square foot by year’s end.