Brooklyn and Queens Producing New Office Space at a Pace Not Seen Since the
Construction of MetroTech Center and the Citigroup Building in Early 1990s
New York City is in the midst of its biggest office
construction building boom in three decades, according to a New York
Building Congress analysis of multiple data sources.
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| Source: New York State, Current Employment Survey |
Based on a review of Real Estate Board of New York data,
the Building Congress projects that 2.3 million square feet of new
office space will be completed in Manhattan in 2017, followed by 7.2
million square feet in 2018 and 5.6 million square feet in 2019.
If realized, the three-year total of 15.1 million square feet of office
space, spread across 13 new office towers, would represent the best
three-year total since 15.3 million square feet of commercial office
space was completed between 1988 and 1990.
Thanks to this late decade surge, the Building Congress
projects a total of 27.4 million square feet of new Manhattan office
space will be completed between 2010 and 2019, up from 19.4 million
square feet of office space constructed in the 2000s and 10.7 million in
the 1990s. This decade’s total, however, will fall well short of
the 49 million square feet of space built in Manhattan during the 1980s
and the 55.4 million produced in the 1970s.
The Building Congress also anticipates the completion of
7.5 million additional square feet within four major office projects 1
Vanderbilt, 50 Hudson Yards, The Spiral at Hudson Boulevard and the
office portion of the Moynihan Train Hall between 2020 and 2022.
That estimate could quickly rise if projects such as 2 World Trade
Center, 2 Manhattan West and 3 Hudson Boulevard move ahead. These
projects, which would create another 5 million square feet combined,
have been fully designed and have all the necessary approvals to proceed
as soon as an anchor tenant is signed.
The boom isn’t limited to Manhattan. Some of the largest
outer borough office projects in decades are currently under
construction as well, including The JACX, Tishman Speyer’s 1.2 million
square foot development in the Long Island City section of Queens, and
Dock 72, a 675,000-square-foot office building being co-developed by
Rudin Management and Boston Properties at the Brooklyn Navy Yard.
In fact, according to a Cushman & Wakefield analysis,
a total of 6.9 million square feet of new office space is currently
under construction or in the planning stages in Brooklyn and another 3.6
million square feet is in the development pipeline in Long Island City.
Of that 10.5 million square feet, 8.5 million square feet could be
ready for occupancy by 2021.
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| Source: Real Estate Board of New York and Urbanomics |
In what could be a sign of even further momentum outside
of Manhattan’s traditional office center, the other four boroughs
accounted for 46 percent of all office construction starts by value in
the first half of 2017, compared to just 17 percent in all of 2016 and
less than four percent overall in 2015, according to Dodge Data and
Analytics.
“Not since the Citigroup Building in Long Island City and
MetroTech Center in Downtown Brooklyn were completed have we seen so
much office construction in the boroughs outside Manhattan,” said New
York Building Congress President & CEO Carlo A. Scissura. “And
this time the storyline is different. Rather than looking to the
outer boroughs as a cheap alternative for a number of back-office
operations, developers want to be there because that’s where the
creative workforce wants to be.”
He added, “The most exciting thing is what this new
construction means for New York City over the long run. Our
continued economic growth hinges on our ability to attract new
industries and provide emerging companies with the dynamic types of
spaces they need to attract talent and expand within the city’s
limits. That’s exactly what is happening today in Long Island City
and in multiple Brooklyn neighborhoods.”
Recent Construction Starts
According to a Building Congress analysis of Dodge Data
and Analytics, office construction projects with a total combined value
of $1.4 billion were initiated in New York City during the first half of
2017, which is roughly comparable to the average for most recent
years. A total of $1.9 billion in new projects (both ground-up
construction and alterations to existing buildings) was commenced in the
first half of 2016. Manhattan office starts reached $1.3 billion in the
first six months of 2014, and $1 billion in 2013.
The one outlier was the first half of 2015, which
witnessed $5.8 billion in new office projects, thanks in large part to
the start of construction on multiple office towers in Hudson Yards and
Manhattan West on the far West Side.
Office Fundamentals
Leasing
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| Source: Dodge Data & Analytics |
The brokerage firm CBRE estimates that the vacancy rate in
Manhattan at the end of June was 8.1 percent while availability (defined
as space being actively marketed for occupancy within 12 months) was at
12 percent. Both percentages are up slightly from the same period in
2016. Average asking rents in Manhattan have remained relatively steady
over the past 12 months.
Based on leasing data from the first six months of the
year, the Building Congress estimates that a total of 27.2 million
square feet of office space will be leased in 2017, up from 22.8 million
square feet in 2016 and slightly above the previous five-year average
of 25.7 million.
Employment
New York City office employment reached 1.97 million in
June, which is the highest level of office employment in the city’s
history. Through the first half of 2017, New York City is on pace
for its seventh consecutive year of office job growth since hitting a
post-recession low of 1.65 million in January 2010.
Mr. Scissura noted, “The ongoing office construction boom is in large
part a function of New York City’s ability to attract the world’s most
successful companies and creative workers. With so much new office space
still in the pipeline and with the East Midtown rezoning finally
approved, we will need to continue the positive trend in overall office
employment. That is why the Building Congress is in such strong
support of Mayor de Blasio’s program to create 100,000 new jobs in such
growth industries as technology, cybersecurity, life sciences and health
care.”
