BOMA New York: State of the Market - Sharon Hart

Last week’s Pinnacle Awards at Chelsea Piers gave us an opportunity to celebrate some of the best of New York City’s commercial real estate. Looking around the room at the property managers, engineers, owners, service providers and other professionals who keep our buildings operating every day, I was reminded of something that can sometimes get lost when we talk about the state of the market: behind every leasing statistic, occupancy number and successful building is a team of people making it happen. 

And right now, there is good reason to feel encouraged about New York’s office market. 

According to Cushman & Wakefield’s latest Manhattan office report, New York City employment reached nearly 4.9 million positions through May, while office-using employment climbed to a five-month high of 1.54 million jobs. Professional business services and financial services both added jobs during the period, providing an important foundation for continued office demand. 

We are seeing that strength reflected in leasing activity as well. Following an exceptionally active first quarter, Manhattan recorded another 8.2 million s/f of leasing in the second quarter. Year-to-date leasing reached 17.7 million s/f, up 12.6% from the same period last year. Combined new and renewal leasing over the past twelve months reached 23.5 million s/f, with renewals increasing nearly 23%. 

For those of us who operate buildings, renewals are especially important. Attracting a tenant is one achievement; creating an environment where companies are willing to make another long-term commitment is another. Many factors influence a renewal decision, but the quality of the building, its operations and the experience we provide all matter. 

Vacancy is also moving in a positive direction. Manhattan’s overall vacancy rate declined to 19.3%, its lowest quarterly level since the third quarter of 2021. Direct vacant space reached a sixteen-quarter low, while sublease availability dropped to levels not seen since the second quarter of 2020. 

We are also beginning to see demand broaden beyond the top tier of the market. As Class A availability tightens, more tenants are considering high-quality Class B properties. That is an important opportunity for owners and managers who continue to invest in their buildings and focus on delivering a strong tenant experience. 

Pricing reinforces the importance of quality. Class A asking rents reached $84.79 per s/f, continuing the flight-to-quality trend we have been discussing for several years. But quality cannot be defined simply by a building’s age, location or amenity package. 

A well-run building matters. 

Reliability matters. Cleanliness matters. Responsiveness matters. Sustainability matters. And perhaps most importantly, the experience our tenants have every day when they walk through the doors matters. 

This is why the Pinnacle Awards mean so much to our industry. We recognize outstanding buildings in categories ranging from Historical Building and New Construction to the Earth Award and our newest category, Best Building Amenity. We also recognize the chief engineers, property managers and building operations professionals whose work makes those buildings successful. 

These awards are not simply about beautiful lobbies or impressive amenities. They recognize the planning, attention to detail, problem-solving and commitment to service required to operate exceptional buildings every day. 

That work has always been important, and it becomes even more critical in a competitive market. Tenants have choices. Owners are competing for occupancy and investment. Expectations around service, technology, sustainability and the workplace experience continue to evolve. The buildings that succeed will be the ones whose teams understand those expectations and consistently deliver. 

For anyone interested in taking a deeper look at the forces shaping the market, BOMA New York’s CRE Pulse podcast will feature a State of the Market episode in October. Host David Song of Hillmann will be joined by Warren Celiz of CBRE, Katie Rodrigues of JLL, and Rachel Casanova of Cushman & Wakefield, bringing together perspectives from across our commercial real estate community. 

There is still work ahead, and New York commercial real estate will continue to evolve. But employment growth, leasing activity, declining vacancy and demand for quality space give us good reason for optimism. 

What gives me even greater confidence is something that doesn’t appear on a market report: the caliber of the people working in this industry. 

I saw it again at the Pinnacle Awards. New York has extraordinary professionals who care deeply about their buildings, their tenants and their work. Markets change, tenant expectations change and buildings change, but that commitment to excellence has always been one of the strengths of New York commercial real estate. 

And I believe it will continue to be. 

Sharon Hart, RPA, CPM, LEED AP, is chair of BOMA New York.