The largest amount of new construction to hit Manhattan since the 1980s will lift asking rents this year for office space in New York as demand likely continues to grow faster than the U.S. average, executives from Cushman & Wakefield said in a recent media webcast reported by Reuters.
“(New York) is still a magnate for corporations from around the world and that will allow New York to continue to grow even if job growth slows elsewhere in the country,” said Ken McCarthy, the real estate services company’s principal economist.
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The Jan. 9 announcement by Discovery Communications Inc. that it plans to relocate its global headquarters to New York next year from Silver Spring, MD, where it employs 1,300 people, is the latest example, McCarthy said.
He said he desirability among young professionals to live in city centers benefits New York, as does the overall growth of the U.S. economy, which was on track this year to post its best annual performance since the current expansion began in 2010.
New York state data indicates Manhattan’s unemployment rate was 3.6 percent in November, lower than December’s national rate of 4.1 percent.
Cuishman and Wakefield said that more than 5.7 million sq. ft. of new construction is will be delivered in 2018, the highest volume of new office space to hit the city since 1986.
While the new construction will lift vacancy rates slightly, it will increase overall asking rents but push overall asking rents because new space is always more attractive to prospective tenants.
The brokerage reported that Manhattan’s vacancy rate in the fourth-quarter was 8.9 percent, below the historical average of 9.5 percent. While average asking rents fell less than 1 percent to $72.25 a sq. ft. from the fourth quarter of 2016, rents for new Class A construction rose to more than $100 sq. ft.
Manhattan office leasing activity increased 16 percent last year from 2016, with 30.5 million square feet of new leases signed, which marked the second-highest level in 17 years, the company reported.
