New York’s office building boom has petered out, driven by record vacancies

JPMorgan Chase’s under-construction headquarters, Center, is rising in midtown Manhattan.
Gary Hershorn/Getty Images

  • Manhattan has an enviable record of building skyline-defining office buildings.
  • But the opening of large office buildings in the neighborhood will slow down after 2025, according to The Times.
  • Higher construction costs and the effects of increased telecommuting are playing a role in the shift.

Over the past 25 years, New York City has experienced many unprecedented economic challenges, from the aftermath of the terrorist attacks on September 11, 2001, to the devastation of the COVID-19 pandemic.

One thing, however, has long remained a constant in Manhattan: the construction of large, skyline-defining office buildings.

But with many of New York’s most ambitious office projects on hold for the foreseeable future, the city may not see a significant number of large office towers open until 2030, according to The New York Times.

According to The Times, only a handful of large office buildings — containing more than 500,000 square feet — are slated to open in 2024 and 2025. Beyond that time frame, there are few projects on the horizon that will be completed by the end of the decade, according to the newspaper.

Driven by higher construction costs and increased office vacancy rates, areas such as Midtown Manhattan and Lower Manhattan, long the nexus of high-powered companies’ operations, will see a slowdown in the proliferation of large office buildings.

According to The Times, nearly 20 large office buildings proposed for construction have yet to see shovels in the ground to begin the projects.

There’s also the issue of signing anchor tenants to commit to occupying hundreds of thousands of square feet of office space.

One of the final centerpieces of the new World Trade Center complex — the long-planned 2 World Trade Center — has yet to begin construction, as developer Silverstein Properties has so far been unable to find an anchor tenant for the building, according to The Times.

For developers looking to hire a tenant in a large building, the market simply isn’t seeing large employers looking to move out of their current spaces, according to the paper.

One World Trade Center, downtown, in Lower Manhattan. Two World Trade Centers, one of the last parts of the new WTC complex, have not yet been built.
Gary Hershorn/Getty Images

Remote work has also reduced the need for some companies to have the large physical footprints that were once common in pre-pandemic Manhattan.

“It’s hard to justify putting a shovel in the ground when you have supply and demand fundamentals that are not up to par,” CBRE US Debt and Structured Finance President James Millen told The Times.

So in Manhattan, where for more than two decades construction cranes have risen everywhere amid an influx of residents into the neighborhood, a slowdown in office construction will have a significant impact on the local economy.

According to CBRE – the real estate services and investment company – more than 52 million square feet of office space has been built in Manhattan in the last 23 years. The figure is a reflection of New York’s confidence as one of the leading economic centers in both the US and the world.

But at the end of the third quarter of 2023, 17.9% of Manhattan office space remained on the market, a record, according to a report issued by real estate brokerage firm Colliers.

Many neighborhoods in the city are still recovering from the pandemic. And the delay in office construction threatens the city’s ability to fund a range of services for residents, as property taxes from office buildings typically bring big money into city coffers each year.

The new JPMorgan Chase building, where the last steel beam went up last month, is one such building the city is touting as it asserts its continued status as a global business hub.

Located at 270 Park Avenue, just steps from Grand Central Terminal in midtown Manhattan, the 60-story building will serve as JPMorgan Chase’s global headquarters and be home to approximately 14,000 employees when it opens in 2025. The company in the statement said 8,000 construction jobs – critical economic drivers for such development – were created as a result of the massive project.

Then there’s the issue of office buildings being converted to condos, a top priority for housing advocates and lawmakers in a city starved for affordable housing. Manhattan has some of the highest income disparity of any jurisdiction in the country, and many politicians have rallied around housing redevelopment as a way to keep working and middle-class New Yorkers in the city.

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