Is this the end of expensive office space in New York??

David Goldsmith

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Paramount Group posts $16M quarterly loss

Office landlord’s buildings are concentrated in Manhattan and San Francisco​

Albert Behler, CEO of Paramount Group and patient father to its Midtown offices, still expects his underperforming kids to turn things around.
“Every child has a different character. So every building has a different character and every lease is different,” Behler said Wednesday, sidestepping an analyst’s question about what price 500,000 vacant square feet at 1301 Sixth Avenue could command.
If children are products of their environments, the office REIT could hardly have picked worse milieus than Manhattan and San Francisco to concentrate its assets before the pandemic. For the second quarter it reported losing $15.9 million, compared with a loss of $6.3 million in the same period last year and a $2.5 million gain two years ago.

Paramount has marketed the Sixth Avenue space, once leased by Barclay’s, for more than a year without landing a tenant — a quest that the Delta variant’s spread will not make any easier.
Still, Behler, on an earnings call Wednesday, expressed optimism about office space. And funds from operations came in at a healthy $47.6 million for the quarter, or 22 cents per share, within shouting distance of the $50.1 million in the same quarter last year and $53.2 million in 2019. The company credited lower operating costs during the pandemic.

Paramount executives said in New York City it leased 247,000 square feet during the second quarter with an average term of 9.6 years and at initial rents averaging about $70 per square foot.

The leases included 81,500 square feet at 31 West 52nd Street between Bracewell and Centerview Partners and 34,500 square feet at 1633 Broadway to the Thespian Theatre for a 15-year term.
Behler cited the theater lease as proof that New York City would return to its former glory. But San Francisco, where Paramount has 30 percent of its asset value, has been even slower to come around.

“San Francisco has certainly rebounded more slowly, probably because of the prolonged lockdowns,” Deutsche Bank analyst Derek Johnston said on the call.
“It’s a different kind of culture that you have in California,” Behler explained. He later said that office attendance by Paramount’s San Francisco tenants is still only 7 percent to 10 percent.

The tech workers who set the tone in the northern California office market are likely to work from home for a while longer. Apple and Google, both based in California, recently delayed the date when it will ask workers to return to the office, and big tech companies are taking advantage of remote work to recruit talent from small-market firms.


David Goldsmith

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Manhattan office rents hit 4-year low as availability remains at record-high​

Growth in leasing volume accompanied by increase in sublease inventory, reversing downward trend​

Manhattan’s office availability rate held steady at 17.1 percent in July, matching the record-high set two months ago, as asking rents dipped to their lowest level in years.

The high availability rate was despite the fact that Manhattan’s office leasing volume in July was up 15 percent compared to June, according to Colliers International’s monthly market snapshot.

David Goldsmith

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Deal flow increasing in suburban office market.

Oak Hill Advisors Leads Group Investing $326.5 Million in Suburban Office Property Company​

The investors are betting that the property type will benefit from shifting work and living patterns accelerated by the pandemic

An investment group led by Oak Hill Advisors’ new real-estate business is making a $326.5 million investment in a suburban office building company on the premise that the property type will benefit from shifting work and living patterns accelerated by the pandemic.

Oak Hill’s real-estate unit is making a debt-and-equity investment in Workspace Property Trust LP, a six-year-old firm that owns 10 million square feet of mostly suburban office space in Tampa, Fla., Phoenix, Minneapolis, Philadelphia and other markets. The deal will help give Workspace the muscle to go on a shopping spree over the next five years, said Tom Rizk, the commercial real-estate veteran who is co-founder and chief executive of Workspace.
“Over a five-year period, we would like to do $5 billion in acquisitions,” he said.

David Goldsmith

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Just like with residential, volume spikes as prices come down.

Midtown Manhattan doubles office leasing in August as rents slide​

Manhattan’s asking rent is at lowest since 2017 at $72.68 per square foot​

Leasing volume in Midtown Manhattan more than doubled in August from the prior month as the island’s average office asking rent slid to $72.68 per square foot, the lowest since 2017.
A total of 1.46 million square feet of office space was leased in Midtown, or about 60 percent of Manhattan’s leasing volume for the month, according to Colliers International’s Manhattan office market snapshot for August. That helped reduce Manhattan’s availability rate to 16.9 percent from a record 17.1 percent in July.

Helping drive that reduction was a 670,000-square-foot reduction in net sublease availability, the largest monthly drop recorded in six years. Still, the amount of available space on the market — more than 90 million square feet — remains 70 percent higher than in March 2020.
August leasings were led by Crédit Agricole’s 167,000-square-foot deal at Paramount Group’s office tower at 1301 Sixth Avenue and DBO USA’s 143,000-square-foot deal at Tishman Speyer’s Metlife Building at 200 Park Avenue, both in Midtown.

Leasing volume in the Midtown South and Downtown submarkets was 508,000 square feet and 473,000 square feet, respectively, both lower than the month before.

David Goldsmith

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Flight to quality in office real estate leaves trophy buildings the only winners

As office markets emerge from pandemic shock, Class B and C properties will suffer the most, analysts say​

Seventeen months into the pandemic, Black Rock — the famed Eero Saarinen-designed skyscraper whose hulking presence has loomed over Manhattan’s Sixth Avenue for nearly 60 years — finally found a buyer.
When the deal closes later this year, the 38-story office tower at 51 West 52nd Street will fetch $760 million, or about $874 per foot, nearly 25 percent less than the $1 billion that owner ViacomCBS sought for its longtime home before the pandemic ravaged the city’s office market.

Just how much Covid-driven uncertainty contributed to the haircut is unknown. None of the parties involved in the negotiations would comment. But sources said that the delayed sale, which came almost two years after ViacomCBS announced its intention to shed the property, shortened its existing lease terms to less than five years.
The fact that the seller is going to lease back about a third of the building’s 870,000 square feet on a short-term basis — meaning the buyer will assume the responsibility of securing new tenants to occupy a large portion of the building in the near future — also likely had an impact.
“I thought it was a very good price that they got, especially in the current environment,” said Scott Rechler, CEO of RXR Realty, which was not involved in the deal. “It’s a classic building. It’s a great location. But it still needs to have a big investment made into it to bring it into the 21st century.”
In the early months of the pandemic, sales contracts for multi-tenant office buildings negotiated pre-Covid often had to be reworked, resulting in 5 to 13 percent price cuts, said Eric Enloe, a Chicago-based executive in JLL’s valuation division. Adjustments were necessary because of the grave uncertainty facing those properties’ rent rolls, he said.
“At that point, there was a question whether office tenants would pay the rent or they would walk away,” Enloe explained. “There was economic risk… and a lot of uncertainty on how long this would last, whether there would be a vaccine, when people would get back into the office.”
The initial shock that froze the office market has been somewhat alleviated thanks to the widespread availability of vaccines, but uncertainties remain over future demand for office space. A majority of employees have yet to return to their workplaces, and even if they do go back in the near future, many of them will not report five days a week.
Some predict that the longer people work from home, the more likely the style will stick. And the more it sticks, the more substantial its impact on the values of office buildings will be.
“We think work from home is going to affect commodity office products more,” said Kevin Shannon, co-head of U.S. capital markets at Newmark. “That habit is going to have minimal impact on Class A, newly built or repositioned products.”
An analysis from Green Street shows that U.S. office property values as of July — the latest available at press time — were about 8 percent lower than March 1, 2020. In fact, offices, along with malls, are the two sectors that have yet to show strong signs of a rebound from their pandemic lows, with the office index staying almost flat for 16 months. Meanwhile, the all-sector index has gone back up above pre-pandemic levels, thanks in part to an industrial real estate boom.

Distress test

To gauge the potential impact of flexible working patterns on office real estate’s cash flows and values, Fitch Ratings’ Steven Marks conducted a stress test, exploring a scenario in which all office employees with the ability to work from home did so 1.5 days a week, on average. According to the analysis, this hybrid setup would lead to nearly 20 percent fewer people in the office on a given day.
But in the flex-working era, an office with 20 percent fewer people wouldn’t necessarily require 20 percent less space. So the team used a 2:1 ratio. An office with 20 percent fewer people would likely require 10 percent less space, with the excess used for breakout rooms, training areas or collaborative space, Marks said.

Historically, when occupancy goes down, average rents go down a bit further, while landlords’ expenses do not see commensurate reductions. The Fitch team concluded that 10 percent less space would lead to a 15 percent decline in net cash flows, and the value of office properties would drop by about 45 percent as a result.
If people work remotely three days a week, the stress test indicated, the value of office properties would tumble 54 percent.
Marks emphasized that Fitch hasn’t used this stress test information for rating purposes, as each property has different fundamentals, including terms of existing leases and major tenants’ creditworthiness, and that the stress test was a way to illustrate the potential magnitude of the impact of continued remote work.
Marks noted that many of the metrics used in the analysis, such as average days spent working remotely and how those working patterns will impact space needs and rents, are very much in flux.
“We do think that the story is yet to be written,” he said.

Long-term cushion

Office landlords and those peddling their buildings say that the true impact of hybrid work patterns on property values could vary greatly depending on the classification and location of each property. In particular, David Heller, of Savills’ capital markets group, disagreed with the notion that a hybrid work model will lead to a reduction in space.
“A lot of companies are recognizing that, yeah, perhaps we need to offer some form of flexibility,” Heller said. “But if everybody’s in the office three days a week, they can’t really shed office space because invariably, they’re going to be in on some of the same days.”
On the capital markets side, investors who recently traded office buildings haven’t taken the impact from flexible working into their acquisition price assumptions, said Mark Godfrey, who leads CBRE’s valuation team.
“They’re looking at stability happening, and a return to more pre-Covid type market conditions as the world recovers,” Godfrey said.
Indeed, the latest cap rates for Class A office properties in Manhattan, for example, are the same as they were in the second half of 2019 — between 4.5 and 4.75 percent for stabilized properties, according to a CBRE survey.
The consistency implies that the investment risk in Manhattan’s Class A office properties has not changed as a result of the pandemic. This is in stark contrast to the borough’s office leasing market, where vacancies are at record highs and the average asking rent hit a four-year low in August, according to Colliers International.
Nationwide, office leasing is showing some signs of recovery, with 29 percent more leases signed in the second quarter than in the first. But leasing volume was still 40 percent below its pre-pandemic quarterly average, and net absorption remained negative, according to JLL.
Office landlords owe their relative financial stability in the pandemic mostly to the long-term nature of office leases. Even when landlords saw cash flows decline due to vacancies, they’ve been able to withstand it because — unlike during the global financial crisis — they weren’t over-leveraged, said Lisa Pendergast, executive director at CRE Finance Council, a trade group for commercial real estate lenders.
“Loans were underwritten at much lower loan-to-value ratios,” she said. “So your leverage was not as high, and so your cash flow doesn’t need to be exceptional in order to make your debt payment.”
Savills’ Heller agreed.
“Even if my cash flow is decreased for a certain period of time, because my debt service is lower, my coverage is still there,” he explained. “So I can still support a fairly healthy financing environment.”
As a result, there have been far fewer distressed office properties on the market, and bargain-hunting investors were mostly left disappointed.

The name on the door

Investors are flocking to office buildings occupied by a major single tenant with a long-term lease, and the value of those properties has risen higher than before the pandemic, said JLL’s Enloe.
“There’s tremendous demand, both domestic capital and foreign capital, chasing those transactions,” Enloe said.
In July, South Korean real estate investor JR Asset Management Company paid $282.6 million to acquire a Google-leased 222,000- square-foot office building in the Silicon Valley city of Mountain View, according to real estate publication The Registry. The sale price works out to about $1,273 per foot.
And in May, Brookfield Asset Management bought a Facebook-leased 198,000-square-foot office building in Bellevue, Washington, for $200 million, or $1,010 a foot. It was Brookfield’s second purchase in the neighborhood, following a $365 million acquisition in October of a 338,000-square-foot office building ($1,080 per foot), also fully occupied by Facebook, according to local media reports.
(It’s notable that both Google and Facebook have delayed their return-to-work plans to at least January 2022 and have said they will allow certain employees to work from home permanently.)
Newmark’s Shannon, who is based in Los Angeles, maintained that while most office markets on the West Coast are still struggling because of the pandemic, certain cities are doing exceptionally well, and Bellevue is one of them, thanks to such tech giants as Amazon, Microsoft and Apple, in addition to Facebook, that are all gobbling up office space.
Another hot market is Burbank, California, which has become a battlefield in the streaming wars with Netflix, Disney and Comcast each taking up office space in the city, and San Diego, where office supply is shrinking because of ongoing office-to-lab conversions to accommodate a thriving life sciences industry.
“They are having bidding wars in those markets because the fundamentals are clear,” Shannon said. “In most markets, though, there’s not as much transparency on the fundamentals, and you’re waiting for data points on what rents are going to be post-Covid, and what absorption is going to be.”
The trend isn’t confined to the West Coast. Citing marketing materials, Bloomberg reported on Aug. 31 that Kevin Hoo’s Cove Property Group is looking to sell Hudson Commons, its 25-story, 700,000-square-foot office building on west side near Hudson Yards, for more than $1 billion.
Nearly half the building’s space serves as the corporate headquarters of Peloton, whose $92 per-square-foot lease runs through 2035. A further 100,000 square feet is leased by Lyft through 2029.

Structural impairments

Still, industry players all agreed that this flight to quality — in which tenants seek more updated office products to attract talent — is real, and values of outdated office buildings are likely to suffer.
“There’s a structural shift in the market, where the Class B buildings are going to be structurally impaired,” said RXR’s Rechler. “Even as the economic cycle recovers, I don’t think those values are going to recover.”
The trend is affecting not only Class B and C buildings, but some Class A properties, too, leaving so-called “trophy” buildings as the only winners.
According to Avison Young’s Craig Leibowitz, average net effective rent — base rent minus tenant improvement allowance and free rent — for Class A, B, and C buildings has dropped by more than 10 percent in the pandemic, while average net effective rent for trophy buildings — defined as the top 10 percent of the market — has stayed the same.
One trophy building is SL Green Realty’s newly constructed Midtown Manhattan skyscraper One Vanderbilt, which, according to documents viewed by The Real Deal, is currently asking rents ranging from $130 per square foot all the way up to an eye-popping $322 per square foot. SL Green closed on the $3 billion refinancing of the tower in June, a major endorsement from Wall Street that top buildings will hold their value.
Greg Kraut, co-founder and CEO of KPG Funds, which specializes in modernizing mid-market office buildings, said he hasn’t seen prospective tenants looking to shrink footprints. Instead, tenants have requested more thoughtful, healthy, efficient use of space, including more common areas, amenities, collaborative meeting spaces and breakout rooms, to welcome back their employees and attract top talent.
Kraut added that he’s seen more buying opportunities in the past nine months or so, as values of not-so-attractive buildings have come down.
“What we look at is the unrenovated, untenanted buildings in high-demand areas,” Kraut said. “There’s a significant discount to what it was before the pandemic.”
Kraut’s vision may be shared by Black Rock buyer Harbor Group International. The firm, led by Jordan Slone, already announced plans to make “significant upgrades” to the skyscraper’s interiors and amenities prior to closing the deal.
“This is the opportunity of a lifetime,” Kraut added.

David Goldsmith

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Delta force: Surging Covid variant spoils return-to-office plans​

Dashed hopes for a widespread revival of in-person work after Labor Day leave office markets in limbo​

As recently as July, visions of reoccupied desks and packed commuter lines danced in the heads of employers and office landlords, who clung to hopes that a widespread return to the workplace after Labor Day might still be in the cards.
But an explosion of Covid cases driven by the highly contagious Delta variant has forced a growing number of firms to reconsider their plans.

With infection and hospitalization rates rising across the U.S. — and persistent vaccine hesitancy rendering herd immunity unlikely — many companies are now putting off previously announced deadlines for employees to start reporting to the office.
Delta’s rise has muted cautious optimism for a speedy economic recovery in general, and for the office market in particular. The vacancy rate in Manhattan, the country’s largest office market, stood at 16.9 percent in August, a hair below the record 17.1 percent set in May and matched in July.

Despite a slight uptick since the start of the year, office use in major markets remains just a fraction of pre-pandemic averages from the first quarter of 2020 — 38 percent in New York, 49 percent in Chicago and 62 percent in Los Angeles, according to anonymized data from Brivo, a firm that supplies card-swipe and other access-control systems for offices.
In each of the first three weeks of August, office occupancy actually declined in New York, Los Angeles and San Francisco as delta continued to generate headlines, according to card-swipe data from Kastle Systems.
“The delta variant is a meaningful threat to [New York City’s] recovery,” Mark Zandi, chief economist at Moody’s Analytics, told the New York Times in mid-August.

Delayed response

Firms in the tech sector — among the first to go remote at the start of the pandemic — are now leading the retreat from the Labor Day consensus. Google and Apple both announced in late July that they were pushing their office reopenings to October. But a month later, both firms decided to put it off until January, as did Amazon and Facebook. Twitter, which last year announced that employees could work from home indefinitely, has closed offices that it had recently reopened in New York and San Francisco.
Financial firms including BlackRock, Wells Fargo, Credit Suisse, PIMCO, T. Rowe Price and Liberty Mutual have all pushed back plans to return to their offices until at least October. Boston-based asset manager State Street announced in August that it would abandon and sublease its two Manhattan office buildings entirely in a more permanent embrace of hybrid remote and in-person work.

JPMorgan — whose CEO, Jamie Dimon, fired the starting gun in April for Wall Street’s return when he announced July as the banking giant’s target date — is still sticking by its revised September reopening plan, at least for now, as is Goldman Sachs.
But the list of major firms postponing their office reopenings keeps growing across numerous sectors — from ViacomCBS and Sony Pictures to Ford and Coca-Cola.
An August survey by the Partnership for New York City found that 44 percent of employers in the city have delayed their return-to-office plans because of the delta variant surge. Employers estimated that 41 percent of their office workers would be back at their desks by Sept. 30 — down from their previous prediction of 62 percent three months ago — and they expect nearly a quarter of employees to be working remotely even by the end of January 2022.

Boston Properties, which owns approximately 12 million square feet of office space in the New York metro area, has seen a decline in occupancy of about 10 percent in August, according to the New York Times, but CEO Owen Thomas remains optimistic.
“I think the return to the office is a ‘when’ question, not an ‘if’ question,” he said. “Delta is affecting the when.”

David Goldsmith

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I guess multi-billion dollar tax breaks aren't necessary to attract Big Tech to NYC after all.

Google Plans $2.1 Billion Purchase Of St. John's Terminal On Manhattan's West Side​

Google announced Tuesday it plans to buy the St. John’s Terminal on the west side of Manhattan for $2.1 billion, in reportedly the largest commercial real estate purchase in America since the pandemic began.

The tech giant has been leasing the 12-story two-block parcel adjacent to the West Side Highway by West Street since 2018 and building out its offices there. The 1.3 million-square foot St. John’s Terminal building will anchor its new Hudson Square campus which also includes the buildings at 315 Hudson Street and 345 Hudson Street. The company already owns 111 Eighth Avenue and bought the Chelsea Market building for $2.4 billion in 2018.

Google said in a press release the purchase will close by the first quarter of 2022 and the site is expected to open by mid-2023 “as the new NYC headquarters for Google’s Global Business Organization.”

“New York’s energy, creativity and world-class talent are what keep us rooted here and why we’re deepening our commitment with plans to purchase St. John’s Terminal,” said Ruth Porat, Alphabet and Google Chief Financial Officer, in the release. “We look forward to continuing to grow along with this remarkable, diverse city.”

“What a vote of confidence in New York City. What a statement about the future of our economy and jobs for New Yorkers -- good paying jobs,” said Mayor Bill de Blasio at his press briefing Tuesday. “Google is leading the way here in our economic comeback but also further asserting what we know more and more: New York City is now one of the great tech capitals of the world.”

Google’s presence in New York City began more than 20 years ago with a single employee working out of a Starbucks in Manhattan, noted the company’s Vice President for Global Client and Agency solutions Torrence Boone at the mayor’s press briefing.

The company has about 12,000 employees in the city now, with plans to add another 2,000 employees.

One outside analyst said Google's acquisition of so much real estate could signal New York City's enduring value to companies.

"I think this shows that they still think that New York is a place where it makes sense for them as a business, despite the costs of operating in a high rent, high tax regime area," said Blair Coulson, Vice President & Senior Credit Officer at Moody's Investors Service. "It makes sense for them to be located there because they know that there are synergies that come from that, there's the capability to attract talent that comes from that."

Boone said the company is still committed to a hybrid work model for the time being. In August, Google and Alphabet CEO Sundar Pichai said they were extending their voluntary return-to-office plan until January 10, 2022 "to give more Googlers flexibility and choice as they ramp back."

The site plans also call for renovations at Pier 57 to be completed next year with more office space for Google, a public food hall, community space, galleries, and what the company says will be “the city’s largest public rooftop space and educational and environmental programs run by the Hudson River Park Trust.”

The news was not universally celebrated Tuesday. Andrew Berman, the Executive Director of The Greenwich Village Society for Historic Preservation, said so much of the area's housing stock -- including affordable housing -- has already been eliminated as commercial buildings rise. The neighborhood, west of Soho, will also be home to Disney's new 1 million square foot complex a few blocks away.

"We're seeing housing, including rent-regulated housing, being destroyed to make way for tech-related office buildings. We're seeing historic buildings being destroyed to make way for tech-related office buildings," Berman said.

"I have no particular beef with Google per se," he added. "But I think that the city is not doing its job in terms of directing development, certainly in this part of New York, in an appropriate way to maintain a balance between welcoming new development and new businesses and the tech industry, but also protecting neighborhood character, protecting existing housing, protecting historic buildings."

David Goldsmith

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Manhattan office leasing up 60% in Q3​

Net absorption turns positive first time in two years​

The pandemic-driven downturn in Manhattan’s office market hit an inflection point in the third quarter, with demand finally exceeding supply.
Leasing volume from July to September jumped to a total of 7.23 million square feet, up by 58.8 percent compared to the second quarter. With that, the quarterly net absorption turned positive — for the first time in two years — at 0.87 million square feet, according to Colliers International’s quarterly market report.

Franklin Wallach, Colliers’ senior managing director of research in New York, called this moment the “critical milestone” in the market’s post-pandemic recovery. But he also cautioned the market still faces a long road to recovery.

Looking back at the past 18 months, the net absorption remains negative at 36.6 million square feet. (To put the size into perspective, the entire Downtown Los Angeles office market is 35.44 square feet.) Additionally, more supply is scheduled to enter the Manhattan market in the coming months, “creating pressure on this healthy demand to not only continue, but increase,” he said.

The quarter’s largest new leases included French international banking group Crédit Agricole’s 167,000-square-foot relocation within the Paramount Group’s skyscraper at 1301 Sixth Avenue and global accounting firm BDO USA’s 143,000-square-foot lease at Tishman Speyer’s 200 Park Avenue, both in Midtown.
The total leasing volume was also boosted by mega-renewals, including 514,000 square feet by the advertising giant Interpublic Group of Companies at Vornado Realty Trust’s 100 West 33rd Street in Midtown South; 400,000 square feet by law firm Fried, Frank, Harris, Shriver & Jacobson at 1 New York Plaza — which is owned by Brookfield, Chinese sovereign fund China Investment Corporation, and AEW Capital Management — in the Financial District; and 313,000 square feet by the City of New York at Piedmont Office Realty Trust’s 60 Broad Street, also in FiDi.

Manhattan’s sublet availability shrank by 0.86 million square feet to 19.94 million square feet, or 22 percent of the borough’s total availability. Sublease inventory in the third quarter was down 5.7 percent compared to the pandemic peak of 21.14 square feet in the first quarter, though it’s still about 2.5 times the pre-pandemic amount of approximately 8 million square feet.

The tightening of the market in the third quarter prevented Manhattan’s asking rent from a further decline. The average asking rent for the quarter was $72.74 per square foot, down less than 0.1 percent from the second quarter. The average, however, was the lowest quarterly average since 2017.

David Goldsmith

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For SL Green leasing activity is up, but so are concessions.

SL Green reports strong leasing activity, with more concessions​

A jubilant Marc Holliday, who had just returned from the ribbon-cutting of Summit One Vanderbilt, vehemently defended SL Green’s portfolio during a Thursday earnings call with analysts who questioned the future of office space.
“It doesn’t feel like a switch is just going to automatically go on and everything’s going to rush back,” one analyst said.
“If you polled employees before Covid-19, you don’t think there were employees who would have said, ‘I can be more effective at home’? I mean, come on,” said Holliday, CEO of the real estate investment trust, which owns more office space in the city than anybody. “Firms who do [remote work] will competitively suffer.”

SL Green reports shorter leases, more concessions

Another analyst asked why the future rent increases on a recent lease deal were smaller than normal.

“Anyone who gave you the impression that … any of the leases we’re doing here are underwhelming economics has got their screws loose,” Holliday said.
Despite the company’s stock price falling by as much as 60% at the height of the pandemic, its portfolio hasn’t experienced the decreases in building occupancy that other city office landlords have. Leasing rates have stayed above 90% throughout the pandemic, the company said, falling to 93.1% from 93.6% the quarter before, and buildings are nearly 35% full on a given day.

“What we have visibility into is these companies, regardless of what flexible work model they’re going to, they’re still utilizing … the same amount of space,” Holliday said. “We don’t see that many downsizing.”
But SL Green is still offering more free rent to its tenants than ever to keep its buildings full, according to the company’s latest earnings report. The landlord is giving them 8.8 free months, up from 6.9 months during the first quarter and 2.4 free months in the second quarter.
The REIT signed 44 Manhattan office leases covering 445,453 square feet in the third quarter and 107 office deals covering 1,355,908 square feet for the first nine months of the year.
That’s a marked improvement from the 33 office leases totaling 187,469 square feet it said it signed during the third quarter last year. Lease durations also improved from 4.7 years in Q2 to 10.7 years in Q3. But rent revenues during the third quarter were down nearly 13% from the prior quarter.
Many of the company’s tenants are unsure what their space requirements will be in the future, CFO Matt DiLiberto noted. Some announced they would downsize but then changed their mind, he said.
The company also announced Thursday that Chelsea Piers Fitness is the first tenant at the newly unveiled One Madison.

“Whatever the headlines say, Chelsea Piers thinks they’re going to put people in 55,000 square feet,” Holliday said. “And I think they’re right.”

David Goldsmith

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Staff member
Only 28% of New York office workers are back in the office
  • Only 28% of Manhattan office workers are back at their desks and fewer than half will be back by January, according to a new survey.
  • Employers expect that 49% of office workers will return on an average weekday by January, according to a survey of 188 big employers in Manhattan by the Partnership for New York City.
  • More than a third of employers expect their office space needs in Manhattan will decline over the next five years, according to the poll.
  • Continued weakness in the office sector could prove costly for New York City's budget, as it means a loss in property taxes.
Only 28% of Manhattan office workers are back at their desks and fewer than half will return by January, according to a new survey.

Employers expect that 49% of office workers will return on an average weekday by January, according to a survey of 188 big employers in Manhattan by the Partnership for New York City. That's up from the current level of 28%, yet the survey suggests that remote work will endure long after January and reduce demand for office space in New York.

Employers expect that 49% of office workers will return on an average weekday by January, according to a survey of 188 big employers in Manhattan by the Partnership for New York City. That's up from the current level of 28%, yet the survey suggests that remote work will endure long after January and reduce demand for office space in New York.

According to the survey, more than a third of employers expect their office space needs in Manhattan will decline over the next five years, and 13% expect a reduction in their New York City workforce.

"Post-pandemic, remote work is here to stay," said Kathryn Wylde, president and CEO of the Partnership for New York City, the city's leading business group. "There is going to be a permanent relook at keeping offices and jobs in New York City."

Office vacancy rates in New York City are now at a 30-year high of 18.6%. The value of the city's commercial real estate has fallen by $28.6 billion, or 16.6%, reducing property tax revenue by up to $1.7 billion this fiscal year, according to a recent report from New York State Comptroller Thomas DiNapoli. Property taxes are the largest source of revenue for New York City, and commercial property is the largest source of property taxes, so continued weakness in the office sector could prove costly for the city's budget.

While commercial real estate landlords and developers say leasing activity is strong and workers will return to the office, many employers say the city's high taxes, long commutes and high costs could prolong any recovery in the commercial sector.

By January, only 13% of Manhattan office workers are expected to be in the workplace five days per week, according to the survey. A third will be in three days per week, 15% will be in two days per week, 7% will be in one day per week and 21% will still be fully remote.

The industry with the highest expected average daily attendance in January will be real estate (80%) followed by law firms (61%) and financial services (47%). The industries with the lowest expected attendance in January will be accounting (36%), consulting (30%) and tech (24%).

Wylde said that in addition to workers staying remote, the city is grappling with high-earning business owners and financial partners leaving New York for tax reasons and taking their companies and workforce with them.

"The danger is that when the high earners leave, they take operations with them," Wylde said. "So we hear now of operations in asset management and other areas, not just individual high earners, but the real business operations moving to Texas, to Tennessee, to Florida."

Wylde said 22% of financial firms plan to reduce their New York City-based workforce in the next five years -- an alarming number, given that financial-services are the economic backbone of New York City.

"What's going to happen over the next 5 to 10 years in terms of our economic and tax dependence on a population that now knows its highly mobile," she said.officebile," she sector could prove costly for the city's budget.

While commercial real estate landlords and developers say leasing activity is strong and workers will return to the office, many employers say the city's high taxes, long commutes and high costs could prolong any recovery in the commercial sector.

By January, only 13% of Manhattan office workers are expected to be in the workplace five days per week, according to the survey. A third will be in three days per week, 15% will be in two days per week, 7% will be in one day per week and 21% will still be fully remote.

The industry with the highest expected average daily attendance in January will be real estate (80%) followed by law firms (61%) and financial services (47%). The industries with the lowest expected attendance in January will be accounting (36%), consulting (30%) and tech (24%).

Wylde said that in addition to workers staying remote, the city is grappling with high-earning business owners and financial partners leaving New York for tax reasons and taking their companies and workforce with them.

"The danger is that when the high earners leave, they take operations with them," Wylde said. "So we hear now of operations in asset management and other areas, not just individual high earners, but the real business operations moving to Texas, to Tennessee, to Florida."

Wylde said 22% of financial firms plan to reduce their New York City-based workforce in the next five years -- an alarming number, given that financial-services are the economic backbone of New York City.

"What's going to happen over the next 5 to 10 years in terms of our economic and tax dependence on a population that now knows its highly mobile," she said.

David Goldsmith

All Powerful Moderator
Staff member
Perhaps the biggest change from the last 18 months is workers across the board from exec level to fast food workers standing up and refusing to be dictated to, even walking away from jobs if they can't work the way they want to. Employers who are stuck in the old paradigm still think they can command office workers back to the office, but it seems to me workers aren't obliging. As a result we are continually seeing projections about RTO which are revised as they aren't met

Office stocks take a hit as omicron variant concerns add to growing slowdown in demand​

  • New demand for office space fell in October to the lowest rate since the first quarter of this year.
  • Since peaking in August of this year, demand is now down 30% nationally.
  • "Time is not on the side of office leasing," said Nick Romito, CEO of VTS.
Stocks of the nation's largest office REITs moved lower again Tuesday, as the office market faces new concerns over the Omicron variant of Covid. This comes on top of a new cooling in office demand, which had been improving sharply in the first half of this year as Covid19 vaccinations promised a safe return to work.

Stocks of the largest office REITs, like Boston Properties, SL Green, Douglas Emmett and Alexandria Real Estate Equities all fell sharply Friday, when news of the variant spread, and have yet to recover. These stocks had been surging, up around 25% year-to-date.

The S&P 500 also fell on Tuesday, down more than 1.5% in morning trading.

New demand for office space fell in October to the lowest rate since the first quarter of this year, according to a new report from VTS, a commercial real estate asset management company. That is the second straight monthly decline. Since peaking in August of this year, demand is now down 30% nationally.

VTS tracks new tenant office tours, both in-person and virtual, in core U.S. markets as an indicator of upcoming office leasing activity.

New office demand had been surging since bottoming out in June of 2020. It was up 444% by August of this year. Growth in demand was likely due to a more optimistic return-to-workplace scenario, as Covid19 cases fell and vaccinations ramped up. But new concerns are upending the trend.

"As we pass the 18-month mark since the start of the pandemic, employers and employees alike have largely adapted to a new way of working and in many cases, that means permanent remote or semi-remote work," said Nick Romito, CEO of VTS. "The longer we stay in limbo—the place where, even with vaccines and better Covid-19 treatments, there is still trepidation about returning to work—the greater the likelihood we have a permanent loss of demand for office space and eventually, a new normal. Time is not on the side of office leasing."

David Goldsmith

All Powerful Moderator
Staff member
Up off the bottom but still a long row ahead to recovery.

Manhattan office leasing breaks 3M sf barrier for first time since early 2020​

Still a long road ahead to reach pre-pandemic levels​

Manhattan’s office market recovery continued last month, even as Covid levels rose in many parts of the state.
Office tenants in Manhattan signed more than 3 million square feet of leases in November, the first month to exceed that mark since January 2020’s 3.6 million, according to Colliers’ monthly market snapshot.

To put that into perspective, Manhattan’s monthly office leasing volume in 2019 was about 3.5 million square feet on average, while the 2020 monthly average was about 1.5 million, said Franklin Wallach, Colliers’ senior managing director for New York research.

The November leasing volume was up 14.8 percent from October, and more than four times the volume recorded a year ago.
The year-to-date leasing total stands at 22.13 million square feet, up 27.4 percent compared to the same period in 2020. But it is 41.1 percent lower than the 2019 level.
“Leasing volume has certainly picked up compared to 2020, but there’s still a significant road ahead in terms of catching back up to the pre-pandemic leasing volume,” Wallach said.

The availability rate in November was 16.9 percent, down 0.1 percentage points from October. The rate is still 3.4 percentage points higher than a year ago.

Average asking rent for the month was $74.14 per square foot, up 0.7 percent from October.
The largest lease inked during the month was MSG Entertainment’s new 428,000-square-foot lease at Vornado Realty Trust’s 2 Penn Plaza in Midtown South, followed by insurance firm Chubb’s 242,000-square-foot lease at Olayan Group’s 550 Madison Avenue in Midtown.

The third biggest lease was Dechart’s 241,000-square-foot renewal at 3 Bryant Park, a 41-story skyscraper owned by a partnership between Ivanhoé Cambridge and Callahan Capital Properties.
Net sublease availability in November was 19.46 million square feet, a reduction of 370,000 square feet from October, continuing the downward trend that started four months ago. But the total sublease inventory is still 63.5 percent greater than the March 2020 level.

Manhattan’s overall availability has increased by 68.6 percent since March 2020 to a total of 90.81 million square feet, and more blocks of offices are expected to come online in the coming months, including 60 Wall Street, which is being vacated by Deutsche Bank. The bank moved its headquarters to a 1-million-square-foot space at the former Time Warner Center, now known as Deutsche Bank Center, in Columbus Circle.

David Goldsmith

All Powerful Moderator
Staff member
Gallup estimates 37% desk vacancy in post pandemic workplace.

Bet on It: 37% of Desks Will Be Empty​

I recently asked a team of our advanced analysts to establish an over/under for how many U.S. employees will not be returning to the office full time in the future.

Here are some key facts I learned from them. There are 125 million full-time jobs in America. Of those, right at 50% -- or about 60 million -- report that their current job can be done remotely working from home. We interviewed a representative sample of them.

The research design included organizations ranging from accounting firms where all employees can work from home (WFH) to construction companies where 10% of employees are in corporate backrooms and can also work remotely. The sample includes everyone from any kind of organization who believes they can do their work from home.

Of those 60 million potential WFH employees, a staggering 30% said they would prefer to "never" come into the office during the week. Ten percent (10%) said they prefer working all five days in the office. The middle 60% want a blend of one to four days per week. The most common preference was two to three days in the office per week.

When we asked the "nevers" and the "blends" why they want to be at home, they said it 1) eliminates my commute, 2) improves my overall wellbeing and 3) offers flexibility to balance family needs or other obligations.

Within the combination of those three demands lies a very powerful force of human nature -- one that won't accept the traditional office routine going forward.

The research question was aimed at predicting the percent of people who anticipate working from home in 2022 and how many of their offices, desks and cubicles will be empty in the future.

Our over/under is 37% empty desks.

When the pandemic wanes and something close to "normal" returns, we conclude that there will be a 37% reduction of in-person days worked per week for those 60 million employees who can work from home. Put another way, a tall office building in a big city where all desk jobs can be done remotely -- on any given week -- will have 37% fewer desks occupied than it did that same week in 2019.

As a CEO, I believe there is more human energy and spirited collaboration to be found for employees in the office than sitting home alone. The right in-person culture creates superior individual development and results in the success of teams as well as innovation and customer success. This includes fewer errors and missed opportunities.

To CEOs, I would advise that you don't command them to come in. COVID-19 structurally changed the national workforce's relationship to work. There is a new will of the workplace.

We have to solve for how to better blend work and life. I don't think we have a choice. We already know that most stars will put higher wellbeing over everything else. How we experience life matters more than it did just 24 months ago.

The right in-person culture creates superior individual development and results in the success of teams as well as innovation and customer success. This includes fewer errors and missed opportunities.

Be thoughtful when attempting to create rules and policies. The most effective solutions will lie within figuring out what works best for each individual team member. Clear goals and short, weekly, zoom-based coaching will become more important than ever. This is a good thing because 50% of employees around the world don't know what is expected of them anyway.

If the new blend of life and work is handled masterfully, your culture of teams and managers will remain dedicated to your organization instead of becoming a culture of freelancers and gig workers.

You can bet on it.

David Goldsmith

All Powerful Moderator
Staff member

Data show office workers home for holidays — just like every day​

Card-swipe counts from Kastle reveal how Thanksgiving affected location decisions​

There’s no place like home for the holidays, and for most office workers now, that is also true for the days leading up to them.
Data from just before Thanksgiving suggest that a fair number of the hardy souls who have been venturing into offices will revert to work-from-home as Christmas approaches.
In New York City, for example, an average of 34.7 percent of workers in offices with Kastle Systems card-swipe entry showed up during the week ending Wednesday, Nov. 17, but just 28.3 percent the following week — a drop of 6.4 percentage points, or 18.4 percent.
Among the 10 largest U.S. office markets, according to Kastle, New York’s pre-Thanksgiving percentage-point drop trailed only those of three Texas cities: Houston, Austin and Dallas.
But the Texas cities had far more workers in the office in the first place: 52 percent, 56 percent and 49 percent, respectively. So they had a greater pool of people in position to head home for pre-Thanksgiving work. In percentage terms, New Yorkers did so more often than their counterparts in Austin (17.2 percent) and Dallas (15.1 percent), and was virtually tied with Houston (18.9 percent).
Kastle, a tech security company that collects swipe data from 41,000 businesses across 47 states, reports that New York City office check-ins the week ending Nov. 24 were roughly 60 percentage points below the pre-pandemic level.

[Source: Kastle]
New York City also has the fourth-lowest business occupancy rates of the 10 cities and is four percentage points below the 10-city average, Kastle’s numbers reveal.
The city has failed to surpass 50 percent of check-ins across all industries recorded by Kastle’s swipe system since lockdowns began in March 2020.
Most of the nearly empty offices still have paying tenants, but work-from-home has pushed up availability rates substantially. Manhattan office supply hit all-time highs in the first quarter, totaling 16 percent and nearly six percentage points compared to the first quarter of 2020. Lockdowns began in the final two weeks of that quarter.
Additionally, New York City wages for real estate and rental leasing decreased by 13.7 percent, from $3.06 billion to $2.64 billion, from the first quarter to the second this year, according to New York State Department of Labor’s Quarterly Census of Employment and Wages.
Though numbers are down, not all industries have been equally affected. Kastle data show that across the U.S., the legal industry has a higher rate of in-person work, outpacing all other industries by more than 10 percentage points.
Kastle reported a national average of 58.6 percent occupancy rate for law firms compared to 32.5 percent of all other industries combined. At 47.7 percent, New York City’s legal industry in-office rate nearly doubles the in-person figure for all industries taken together.
Coincidentally or not, real estate law firms have been doing a brisk business lately. The Real Deal’s recent law-firm ranking showed healthy sales volume and deal-making. Robert Frankel, a partner at Cohen & Frankel, stated that firms have been busy because wealthy New Yorkers are buying more luxury real estate.
Whether other industries will follow suit next year or allow their employees to keep working in their pajamas remains uncertain.

David Goldsmith

All Powerful Moderator
Staff member

Tepid top 11: Weak 2021 for Brooklyn and Queens office leasing​

Outer boroughs face long climb to reach pre-pandemic levels​

Brooklyn and Queens may be tired of playing second fiddle to Manhattan, but they do benefit from its spillover when office leasing on the island is hot. In 2021, it surely wasn’t. Not surprisingly, the story was similar in the outer boroughs.
Using data provided by Newmark, The Real Deal ranked the 10 biggest Brooklyn and Queens office leases by square footage. The two most populous boroughs couldn’t escape the work-from-home drag: Only three of the year’s top 10 leases broke 50,000 square feet, after every deal on the 2019 list did.
It was a particularly cruel last five months, as only one of the 11 largest deals was signed after July.

Brookfield’s 690,000-square-foot 15 MetroTech Center nabbed three spots in 2021, signing or renewing tenants for 133,000 square feet. For the second year in a row, Tishman Speyer earned the top spot with 181 Livingston Street, its modern crown atop an Art Deco landmark. Both buildings are in Downtown Brooklyn.
Government agencies remained a steady client, inking three of the year’s top 10 deals.

1: 181 Livingston Street, Brooklyn | St. Francis College | 255,000 sf​


181 Livingston Street (Tishman Speyer)
The college, founded in 1859 by Catholic ministers from Ireland, signed the biggest outerboro lease of 2021 at 181 Livingston Street. St. Francis will take the fifth, sixth and seventh floors of the Wheeler, Tishman Speyer’s glass building above a landmarked, Art Deco Macy’s in Downtown Brooklyn.

This is the second year in a row that the Wheeler has topped our outerboro leases list. Last year, Whittle School & Studios signed a 20-year lease to occupy the entire building. The deal appears to have fallen through (Whittle did not respond to request for comment.)

2: 47-30 35th Street, Queens | NYC Department of Transportation | 192,080 sf​

The Department of Transportation inked a lease for 192,080 square feet in Long Island City. The building is 345,000 square feet of recently renovated industrial space aimed at commercial tenants in the “maker economy.” No details were provided on the term of the deal, and leasing agent Nick Berger of Newmark didn’t respond to a request for comment. The landlord is Nuveen Real Estate, the investment arm of the Teachers Insurance and Annuity Association of America.

3 & 4: 15 MetroTech Center, Brooklyn | JLL, IRS | 51,000 sf, 49,000 sf​

15 MetroTech Center

15 MetroTech Center (Brookfield Properties)
In February, JLL inked an 11-year lease for 51,000 square feet at Brookfield’s office property. On the same day, the Internal Revenue Service renewed its 49,000 square feet at 15 MetroTech.

5: 30-30 47th Avenue, Queens | NYC Department of Health & Mental Hygiene | 47,552 sf​

The Department of Health swept up nearly 50,000 square feet at Atlas Capital Group’s the Factory in Long Island City. The former Macy’s furniture warehouse was recently renovated into 1.1 million square feet of full-floor office spaces. The sale was brokered by a Newmark team including Brian Waterman and Howard Kesseler.

6: Dock 72 | Food52 | 42,000 sf​

Rudin Management and Boston Properties cooked up a hot deal with culinary brand Food52 in October, as the company took a 42,000-square-foot lease at the trophy development in the Brooklyn Navy Yard. The lease, which occupies the entirety of the building’s 13th floor, runs for 12 years. Asking rents are unknown, but CBRE pegged Dock 72’s rates in the mid-$50s and high-$60s in February 2020.

7: 148 39th Street, Brooklyn | Porsche | 40,000 sf​

Porsche and Volvo sign leases at Industry City

Renderings of the Porsche showroom (Photos via Industry City)
The luxury carmaker inked a 10-year, 40,000-square-foot lease for the Industry City building. Esther Bukai of RIPCO brokered the deal for the landlord. Separately (see No. 9), Volvo took 20,000 square feet at the campus, redeveloped by Belvedere Capital, Jamestown and Angelo Gordon & Co. The ownership entity, which controls several of the buildings in Industry City, scored a $77 million mortgage from Blackstone in December, public records show. Justin Weiner of Belvedere signed for the owners.

8: 15 MetroTech Center, Brooklyn | HeartShare Human Services of New York | 33,000 sf​

HeartShare, which offers services to people with intellectual and developmental disabilities, renewed its lease for 19 years at the Brookfield building. The group picked up 33,000 square feet in a deal brokered by Ken Myerson of CBRE and Brookfield’s Jesse Cooperman, Mark Kostic and Ross Hoddeson.

9: 645 Union Street, Brooklyn | Sonder | 29,000 sf​

Sonder, a short-term rental firm based in San Francisco, booked 29,000 square feet in Gowanus. While the length of the deal is unknown, Sonder paid $70 per square foot. Red Pine Capital and Cayuga Capital Management are listed as the sellers.

10: 148 39th Street, Brooklyn | Volvo | 20,000 sf

148 39th Street (HSS)
In July, another carmaker snapped up space at Industry City. Volvo grabbed 20,000 square feet in the turn-of-the-century building with views of the Statue of Liberty.

11: 630 Flushing Avenue, Brooklyn | Revel | 15,000 sf​

In February, the company behind the bright blue mopeds (and Teslas) zooming around the city picked up 15,000 square feet at the former Pfizer plant in South Williamsburg. Acumen Capital Partners owns the 575,000-square-foot building, where asking rents range between $30 and 50 per square foot, according to LoopNet.

David Goldsmith

All Powerful Moderator
Staff member
It's not just how much space companies will need but what to do with the space once they get it.

Architect behind Googleplex now says it's 'dangerous' to work at such a posh office​

For more than three decades, Clive Wilkinson has been among the most sought-after office designers in the world. He has planned spaces for the likes of Microsoft, Disney, Intuit and other companies seeking unorthodox approaches to work life.

But he now has regrets about what is perhaps his most famous work: Googleplex, the tech giant's posh headquarters in Mountain View, Calif.

Wilkinson helped lay out Google's campus after winning its design competition in 2004, leading him to work directly with Google co-founders Larry Page and Sergey Brin.

"Larry and Sergey said at the time, 'We don't really have any reference point but the Stanford campus model,' " said Wilkinson.

In Mountain View, what emerged was a maze of well-lit nooks, bleachers and clubhouse rooms to encourage collaboration. The office would also become famous for its amenities: Gourmet meals. Fitness classes. Organic gardens. Massage rooms. Laundry services. Private parks. Volleyball courts. Swimming pools. And so on.

But looking back, Wilkinson thinks Google's luxurious on-site perks have made workers too dependent on the company, a situation he calls "dangerous."

"This notion that you can provide everything that would support a worker's life on campus might appear to be extremely generous and supportive," he said. "But it also has a whole range of potentially negative impacts."

Wilkinson spoke in an interview at his glass-enclosed hillside home in West Los Angeles, which some have compared to a "spaceship on stilts." His comments on Google's campus came during an extensive conversation with NPR about how the pandemic may forever reshape office life and what it could mean for workers.

While Silicon Valley has long been known for offering unusual amenities to its workers, Google's offerings set a high bar. Other tech giants began to roll out their own free meals, nature trails and private transportation services in efforts to attract and retain talent. But Wilkinson said as companies plan to bring workers back into the office, such arrangements should be reconsidered.

He said blurring the line between work and non-work keeps employees tethered to the office, benefiting the employer most of all. That, he argues, may seem to keep workers happy but can quickly spark burnout.

"Work-life balance cannot be achieved by spending all your life on a work campus. It's not real. It's not really engaging with the world in the way most people do," he said. "It also drains the immediate neighborhoods of being able to have a commercial reality."

Employees have no reason to leave campus to explore local cafes, restaurants or grocery stores because everything is handed to them. To Wilkinson, overly coddling workers like this is "fundamentally unhealthy."

That, he said, "hasn't been recognized as one of the dangerous side effects."

If an employer is trying to foster creativity, "you don't want an overly comfortable workplace. You shouldn't have sleep pods everywhere," he said. "Creative work doesn't happen in a condition of luxury. If you have that much luxury, you naturally want to fall asleep."

At the same time, it is "a difficult one to pull apart," he said. "Because once you made all those offers to your employees, how do you pull back from that situation?"

Authors Charlie Warzel and Anne Helen Petersen talked to Wilkinson about his new perspective on Googleplex in their new book Out of Office: The Big Problem and Bigger Promise of Working from Home.

"There's a way that something that was built with good intentions can be slightly corrupted," Warzel told NPR. "It's not a terrible thing for employees to get nice perks, but what is it in service of? Making you a better worker? Or making sure your needs are met? Or keeping you stuck in this liminal work-like state for as long as possible."

That said, plenty of Google's some 144,000 employees appear to be just fine with the on-site luxuries their employer provides. Surveys routinely place Google at the top of lists for worker happiness and satisfaction with how much employees are paid. When the pandemic forced Googlers off campus, it appears it dented worker morale, and the company is responding with new cash bonuses.

Google, which did not respond to a request for comment, is planning a new multi-billion-dollar campus in San Jose and another massive site in Mountain View.

The office is not dead, Wilkinson argues​

When COVID-19 hit, some 2.5 million square feet of office space Wilkinson's firm was working on was canceled or delayed. But he becomes defiant when asked whether the pandemic has killed the office.

"It's ridiculous to say the office is dead," said Wilkinson, "The office is the fermenting ground for people growing into successful adults. How would that ever be dead?"

Studies suggest remote work will outlast the pandemic. But most companies in a new U.S. Chamber of Commerce survey said they also plan to maintain their office spaces. Wilkinson's corporate clients are now returning. He says most of them are not ready to forgo the office. They are, however, eager for a facelift, one that makes sense in a hybrid work environment.

To a certain degree, he said, companies are winging it.

"People don't know how much space they need anymore, so I think an awful lot of large companies are waiting to see what everybody else does," Wilkinson said.

No one wants a depressingly empty office, something he calls "one of the biggest problems in the new workplace."

He adds: "When you go in there, specifically because of hybrid working, is the place going to feel that it's underpowered and it's running on empty?"

And so he suspects, happily, that the pandemic has wiped out one particular type of office: the cubicle farm.

"Cubicles are like human chicken farming. They have always been bad for anything other than kind of factory farming kind of approach to the office," he said. "Put people in tiny little footprint because it takes less money than an enclosed office and we can kind of keep an eye on them."

Out with the old office, in with the 'boutique hotel' feel​

If jammed-together desks are out and Wilkinson cautions against swanky amenities à la Google, what does the post-pandemic workplace resemble?

Wilkinson envisions big, open spaces with couches and cozy nooks as work stations that are not assigned to any single employee. An environment where it's easy to hang out and chat.

"You might think you're walking into the lounge of a boutique hotel," Wilkinson said. "It's an amazingly effective work environment, even though there's no conventional kind of office furnishing or anything like that."

He has noticed something else about the pandemic-era office plans he is now working on: companies are investing in outdoor spaces. Go ahead, answer your emails in the shade.

"Because now it's seen as being healthy," he said. "Health itself has suddenly become one of the top criteria about where you work."

He said the future office will be a balancing act. It needs to be more attractive than working from home, yet not so attractive that workers don't want to go home.

David Goldsmith

All Powerful Moderator
Staff member
Even with leasing at double Q4 2020 office vacancy in Manhattan continues to rise. I don't think we have seen the last of it, either, because a significant amount of leasing has occurred at the high dollar new developments like 1 Vanderbilt, and many of the firms are moving from existing spaces in Manhattan.

Analysis: Manhattan office submarkets’ uneven recovery

Fourth-quarter leasing up 881% in Chelsea, net absorption down 2,940% in Hudson Yards​

Things may finally be looking up for Manhattan’s embattled office market — but not all of it.

The vacancy rate climbed to 17.3 percent at the end of last year — up by one-fifth from 2020 — but leasing activity accelerated over the year, rising 60 percent in the third quarter and ending the year at more than twice the pace of the fourth quarter of 2020.

Net absorption was still negative, at nearly -2.3 million square feet for the final quarter, but that represented a more than 78 percent improvement from a year earlier, according to data from Colliers International. The third quarter of 2021 actually saw the first positive net absorption in two years, which may help explain office landlords’ uncanny optimism.

Among Manhattan’s three major office submarkets, Midtown was the only one with positive net absorption for the year. It also had the most leasing activity in the last quarter of 2021, inking deals on nearly 4.8 million square feet. That’s over 22 percent more than Midtown South and Downtown combined.
Midtown also commanded higher average asking rents than those two submarkets last year, but that figure declined by nearly 3 percent from the year before. Midtown South made up ground as asking rents rose more than 12 percent over the same period, and its vacancy rate was slightly lower than Midtown’s.

Conditions varied wildly throughout Manhattan’s office submarkets, with some surging while others had an even worse year than in 2020.
The Times Square submarket boasted Manhattan’s highest net absorption in the fourth quarter at more than 1 million square feet, though that was a drop of more than 158 percent from 2020. Hudson Yards, which had the highest net absorption in 2020, saw that figure plummet by a staggering 2,940 percent last year to nearly negative 2 million square feet — the lowest in all of Manhattan.

The prize for most improved net absorption goes to the City Hall area. Its total improved a whopping 4,679 percent to finish the year at nearly 46,000 square feet.

Hudson Yards had the second highest fourth-quarter vacancy rate at nearly 23 percent, up more than 181 percent from the end of 2020 — the steepest rise in Manhattan. The Financial District ended 2021 with the highest office vacancy rate of all, 25.6 percent, up by three-quarters from the year before. The U.N. Plaza area had the lowest vacancy, at 6.6 percent, followed by Greenwich Village at 9.5 percent.

Hudson Yards did score the highest overall asking rent at $134.24 per square foot — a 13 percent increase over 2020, which was the second biggest hike in Manhattan. That could help explain its plunge in net absorption, although a drop was inevitable after the submarket’s big 2020. The biggest year-over-year rise in overall rent came in the Hudson Square area, where average rents went up by nearly 17.5 percent — though only to $82.73.

The biggest drop in overall asking rent was in Tribeca: down by 10.61 percent to $81.27 per square foot. Tribeca did have the city’s highest rent for Class A space, commanding $159.73 per square foot — though that was down nearly 9 percent from 2020.
Leasing activity in the fourth quarter of 2021 also varied widely across neighborhoods. The Times Square submarket’s high absorption figure came on the strength of its robust leasing volume, closing deals on nearly 2 million square feet of space in the last three months of the year — up 468 percent over the same period of 2020.

The biggest increases in fourth-quarter leasing last year came in Chelsea, up 881 percent, and the World Trade Center area, up 811 percent. There were only two Manhattan submarkets where leasing actually fell year-over-year, and the drops were precipitous. The Financial District saw 61 percent less leasing and Murray Hill saw a plunge of more than 78 percent.

Spending on office building purchases totaled just over $4.7 billion last year, according to Ariel Property Advisors, down 8 percent from 2020. But Covid-hindered 2020’s figure included several large deals that actually got started in 2019, before the pandemic, such as German insurer Munich RE’s $900 million acquisition of the 330 Madison Avenue office tower.

The biggest building sale last year was an office deal: CommonWealth Partners paid just over $1 billion for the Hudson Commons building at 441 Ninth Avenue in December, the largest investment sale in the city since June 2019. In fact, office properties dominated 2021’s top 10 list of investment sales.

David Goldsmith

All Powerful Moderator
Staff member

Manhattan office availability hits new peak​

Demand has more than doubled, but market still has long way to go​

Office availability in Manhattan hit a new high in February, bringing office landlords to a new low.
Just under 94 million square feet of office space is available for rent in Manhattan, according to a report from Colliers. The availability rate reached 17.4 percent last month, up 74 percent since the start of the pandemic in March 2020, even as demand has more than doubled from a year ago.
Sublet availability increased by 1.27 million square feet, bringing monthly absorption — for lack of a better word — to negative 1.16 million square feet. While asking rents are up slightly from their pandemic low, the going rate of $74.88 per square foot remains almost 6 percent below pre-pandemic level.

Midtown lost the least, with leasing activity more than doubling year-over-year to 1.49 million square feet. The five largest deals were all for Midtown offices, led by Mutual of America Financial Group’s 252,000-square-foot lease at 320 Park Avenue. Just behind it was AlphaSights’ deal for 236,026 square feet at SL Green’s 100 Park Avenue.

Still, availability in the office corridor hit 16.9 percent, bringing supply to 40.67 million square feet — a 47 percent jump from March 2020.

Activity in Midtown South was led by Estée Lauder’s 64,000-square-foot renewal and expansion at 575 Broadway. Availability remains a record high, but asking rents hit $78.65 per square foot, making it the only market to beat its pre-pandemic average.

Activity farther downtown plummeted by 57 percent from January as Lower Manhattan’s availability reached a startling 19.9 percent. Huge spaces came up for sublet, such as a 332,000-square-foot offering at 225 Liberty Street in the Financial District. Asking rent Downtown has fallen by almost 9 percent since the arrival of the novel coronavirus.

David Goldsmith

All Powerful Moderator
Staff member

Despite calling for return, financial titans shed NYC office space​

JPMorgan has reduced its NYC footprint by 700K square feet since 2020: report​

In a city whose office market depends heavily on financial institutions, several key tenants are downsizing.
JPMorgan Chase, New York City’s largest office tenant, cut its commercial footprint by 400,000 square feet last year, Crain’s reported. The bank, which has said it plans to “significantly reduce” its global office footprint in the coming years, also downsized by 300,000 square feet in 2020.

The financial institution still rents 8.7 million square feet in the city, according to Crain’s, but an entity of its size — particularly one whose CEO was at the vanguard of the return-to-office movement last year, can create a ripple effect if other firms decide to follow suit.

According to Crain’s, Wells Fargo reduced its commercial space in the city by 600,000 square feet last year. Bank of New York Mellon, financial index provider MSCI and insurance firm Voya Financial are also downsizing their nationwide footprints.
JPMorgan spokesperson Michael Fusco told the publication that the firm remains “committed to New York City and planning for the next 50 years,” referencing its new headquarters under construction at 270 Park Avenue. Approximately 14,000 of the bank’s employees are expected to work out of the office.

But JPMorgan’s actions indicate that it might be hedging its bets. The bank is looking to sublease 700,000 square feet at 4 New York Plaza in the Financial District and 100,000 square feet at its Hudson Yards office at 5 Manhattan West, Bloomberg reported Wednesday.
“Remote work will change how we manage our real estate,” JPMorgan Chase CEO Jamie Dimon wrote in a letter to shareholders last year.

Office landlords are still reeling from the pandemic, with the latest market report in Manhattan indicating that office availability reached a new high in February. Just under 94 million square feet of office space were available to rent in Manhattan last month, according to a Colliers report.
The availability rate, meanwhile, hit 17.4 percent, a 74 percent increase from the start of the pandemic. Average asking rents across the borough are up only slightly from their pandemic lows, at $74.88 per square foot, nearly 6 percent below pre-pandemic levels.

David Goldsmith

All Powerful Moderator
Staff member
Number of office workers still well behind every claimed metric since Fall 2020.

Kastle Systems

Getting America Back to Work​

Americans have been living through a period of intense uncertainty since March 2020 — struggling with an unprecedented pandemic and the economic distress it has caused.

To provide some clarity on the issues facing American businesses, Kastle Systems has been studying keycard, fob and KastlePresence app access data from the 2,600 buildings and 41,000 businesses we secure across 47 states. We’re analyzing the anonymized data to identify trends in how Americans are returning to the office.

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