The Empire State Building, The Chrysler Building and One Vanderbilt are seen amongst other buildings in midtown Manhattan on January 11, 2024 in New York City.
Angela Weiss | Afp | Getty Images
Demand for New York City office space has finally returned to pre-pandemic levels, driven by an influx of new workers as well as a drive by employers to see current workers return to the office.
During the fourth quarter, office demand in the city jumped 25% from the year before, according to VTS, which measures demand through unique new tenant tours of properties. The measure is an early indicator of new leasing.
“New York City’s shift back to in-office work reflects the city’s unique cultural and economic dynamics, especially in the finance and tech sectors,” said Nick Romito, CEO of VTS, in a news release.
SL Green Realty Corp, a REIT concentrated in Manhattan office and retail, released earnings last week, and while it missed revenue expectations, analysts pointed to further tightening in the office market as leasing demand accelerates.
On a call with analysts, SL Green Realty CEO Marc Holliday noted that the city’s Office of Management and Budget is forecasting about 38,000 new office-using jobs in 2025, mostly stemming from finance, business services and information technology.
“That translates into millions and millions of square feet of new absorption for each one of those bodies, and those are not work from home bodies for the most part,” said Holliday. “Combine that with the fact that on-site attendance is rising every month as companies are calling people back to the office four and five days a week. We expect to see very strong demand for office space throughout 2025.”
Holliday also noted SL Green ended the year at 92.5% occupancy, and is projecting over 93% leased occupancy in the coming year.
Tech giant IBM recently signed a 92,663-square-foot expansion lease with SL Green at One Madison Avenue, increasing IBM’s total footprint at the property to more than 362,000 square feet.
“The expansion of IBM’s flagship office at One Madison Avenue reaffirms a long-standing commitment to advance the technology sector in New York City and New York State, with a vibrant and collaborative workspace designed to bring employees, clients and partners together from around the world,” said Joanne Wright, IBM senior vice president for transformation and operations, in a release.
New York is the clear winner in the office recovery, but VTS notes other improving markets. San Francisco saw 32% annual growth rate in demand — a faster growth rate than New York’s, though it was starting at a much weaker position. Seattle and Chicago saw growth rates of around 15% each as employers in those cities increasingly embrace hybrid work models that require consistent in-office presence.
“The data shows that while some markets, like New York City, are rapidly returning to traditional office settings, the national picture reflects slow but steady progress,” said Ryan Masiello, chief strategy officer of VTS.
Nationally, demand in the fourth quarter was up 12% from the previous quarter. Historically, demand declines from the third quarter to the fourth quarter.
“This growth is notable — not only for defying seasonal expectations, but for emerging in the midst of a cooling labor market. Businesses appear more willing to invest in office space despite economic uncertainty, signaling a shift in confidence and long-term planning,” Masiello said.
