New York – A boom on Wall Street and a thriving technology sector have pushed the unemployment rate in Manhattan to record lows and propelled office leasing activity to its best first six months of a year in a quarter century, brokerage data shows.
The new leasing of office space rose to 18.3 million square feet in the first six months of 2019, the first time since 1994 at the mid-year point total leases exceeded 18 million square feet, according to data from Cushman & Wakefield.
New leasing activity jumped 21.5% in the second quarter from the year-earlier period to 10.0 million square feet.
Venture capital is pouring into Manhattan, lifting rents in the chic Flatiron section and other areas of the city and driving start-ups into a Garment district increasingly awash in fast-casual dining options, said Zach Aarons, co-founder and partner at venture capital firm MetaProp.
“More tech firms are coming into this neighborhood in what seems like every single week,” said Aarons, whose firm in May launched its third “proptech” fund that hopes to raise $100 million, according to regulatory filings.
“There’s certainly more venture capital than ever before coming into this space, more strategic capital,” he said.
Technology firms with a presence in Manhattan are expanding. Facebook Inc
Companies are on the move as the city’s biggest construction boom in decades has spurred relocations to the Hudson Yards and $100 million office tower makeovers on Avenue of the Americas and elsewhere in the city attract new tenants.
“It’s almost like a chess game,” said Richard Persichetti, lead researcher for greater New York City at brokerage Cushman & Wakefield Plc
“Because of new supply you’ve seen a flight to new development. But we’ve also seen a flight to better quality,” he said.
New construction and renovated office space already built or planned will add about 45 million square feet of office space in Manhattan in the decade ending 2023, Cushman estimates.
When a tenant moves out it draws interest from others, with buildings that are better managed with greater amenities benefiting from the migration, Persichetti said.
Deals involving large spaces drove leasing, a sign of corporate migration as leases of 100,000 square feet or larger accounted for 37.4% of activity in the first six months, with 13 large leases signed in the second quarter, Cushman’s data shows.
The growth in leasing activity is noteworthy because companies are utilizing less space as office densification continues and actual usage declines as a workforce that is connected to mobile devices requires less time at the office.
Manhattan is booming as the U.S. economy enters its 11th year of expansion and non-seasonally adjusted unemployment on the island slid to a record low of 3.3% in April, according to New York State’s Department of Labor.
Professional and business services added 16,400 jobs in the 12 months ended May, Labor Department data shows, while investment banking and brokerage hiring added 1,500 jobs.
The new supply has pressured vacancy rates and helped lift the subletting of space to a nine-year high of 8.7 million square feet, or about one-fifth of total available space. It is the highest subletting percentage since 2010, Cushman said.