The availability of office space in New York City climbed to 70.3 million square feet in the second quarter of 2023, the highest in history, according to real-estate firm Savills.
The record office space availability in New York comes as high interest rates, a mountain of maturing debt and wobbling property prices bear down on landlords across the U.S., with many struggling to keep or attract new tenants in cities saddled with half-empty office buildings.
Flexible work arrangements that have endured in the wake of the 2020-2021 pandemic have also been playing a key role in the widening gap between asking rents at trophy office buildings and lower quality properties.
Savills said the growing amount of available office space has led to increased tenant concessions and pressure on rents overall, even as asking rents on Class A buildings in Midtown Manhattan increased 1.7% in the second quarter to $95.53 per square foot, from a quarter ago.
That compares with a 0.2% increase in asking rents to $59.01 per square feet on lower-quality Class B and C office buildings in midtown, a swath of the city hit hard by the slow pace of return of office workers.
“Preference among many tenants for trophy or Class A+ space is driving rents higher in that segment of the market, while tenants are able to dictate terms to a greater extent for commodity Class A and Class B/C space,” according to the Savills report.
The firm pegged Manhattan’s office availability rate at 19.7%, a new cycle high.
Related: Tenants brace for more office landlords to go belly up on their property debts
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