NYC OFFICE REBOUND WITH 73% OCCUPANCY RATE
Gen Z Resurrecting Malls and Greyhound Stations Shuttered Nationwide.
NYC OFFICES SEE REBOUND WITH 73% OCCUPANCY RATE
A recent report from the Real Estate Board of New York (REBNY) signals cautious optimism for Manhattan's office market, with a not insubstantial victory for the return-to-office movement.
🌆 NYC’s Office Comeback: In December, the average visitation rates at 350 surveyed Manhattan buildings climbed to 67% relative to their pre-pandemic figures. This uptick from November's 65% showcases a steady rise in office occupancy, with the potential to reach 74% excluding the holiday slowdown.
📈 Class Distinctions: Top-tier, Class A+ buildings led with an impressive 74% visitation rate. Meanwhile, Class A and A-minus properties lagged slightly at 64%, and B/C buildings hovered around 68%.
📍 Neighborhood Nuances: Midtown Manhattan emerged as a beacon of recovery with a robust 73% occupancy rate. Midtown South maintained its momentum at 68%, though Downtown experienced a slight dip, settling at 54%.
🔍 Selective Areas: The enthusiasm isn't uniform across the board. Neighborhoods like SoHo, Madison Avenue, and Flatiron are witnessing fierce competition for leasing spaces. Meanwhile, Times Square and Upper Fifth Avenue are catching up but at a steadier pace.
💡 Key Drivers & Hurdles: Two major factors—tourism still lagging behind pre-pandemic levels by about 10% and subdued office visitation—are influencing retail dynamics. Plus, retailers grapple with operational challenges from staffing shortages to rising borrowing costs.
🛍️ Trends to Watch:
- Luxury brands are expanding their footprint with larger stores.
- Quick Service Restaurants (QSRs) are thriving on efficiency, marking their presence across high-traffic areas.
- Innovative concepts like robotic-run vegan restaurants signal a shift towards tech-integrated dining experiences.
💡 Encouraging Signs Amid Challenges: Keith DeCoster from REBNY highlighted that while some cities see stagnating office activity, Manhattan’s gradual yet consistent increase is promising—albeit still trailing behind pre-pandemic levels.
🔄 The Broader Picture: This growth is not just about filling up offices; it represents incremental steps towards revitalizing urban centers. As more employees return to their desks, there's potential for ancillary businesses—from coffee shops to dry cleaners—to see a return to pre-pandemic growth patterns.
🏙️ Corridor Highlights:
- Madison Avenue's "Golden Strip" is attracting global luxury players investing in expansive store buildouts.
- SoHo’s grid sees diversified activity from fashion giants to boutique streetwear labels.
- Novelty shops make waves in Times Square, proving its enduring appeal despite larger vacancies.
Insights gleaned from REBNY. Examine NYCRE-related REBNY’s reports below:
Q3 2023 Broker Confidence Index
Manhattan Retail Report - Second Half 2023
Q3 2023 Broker Confidence Index
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📊Daily Data Visualization
New Home Sales Rise in December
As mortgage rates dip, sparking a flurry of activity in the new-home market, December witnessed an encouraging uptick in sales, bringing a fresh wave of optimism to the construction and real estate sectors.
December 2023 witnessed a notable recovery in the new home sales market, with an 8.0% increase from November, reaching an annual rate of 664,000 sales. This growth is a significant 4.4% rise compared to the same period last year, driven by easing mortgage rates and a more optimistic buyer sentiment.
New home sales rebounded strongly in December, climbing to an annual rate of 664,000 sales—indicating buyers’ renewed interest in new construction amid shifting mortgage rates.
Region Specific Gains
The surge was not uniform across all regions. The Northeast experienced the most substantial month-over-month increase at +32.0%, followed by the South (+10.6%) and Midwest (+9.2%). Conversely, the West saw a decline of -3.4% in new home sales.
Shift Towards New Homes
With for-sale inventory growing by 4.9% year-over-year and slightly easier mortgage conditions, buyers are increasingly turning towards new homes—a trend reflected in new constructions accounting for 31.2% of total inventory.
However, it's important to note that only a small fraction (17.9%) of these homes were move-in ready as of December, highlighting a gap between demand and immediate supply availability.
Dual Threats: Affordability & Inventory Challenges
Amid affordability concerns and limited existing home inventory, builders have adjusted pricing strategies—resulting in the median sales price for new homes dropping to $413,200; this represents a decrease of 3.0% from November and 13.8% from December last year.
This price adjustment has made homes under $400k more accessible than before; their share among sold homes increased from 38% in December last year to 47%.
December’s uptick in new home sales signifies potential shifts within the housing market dynamics as we head into the next year—particularly if mortgage rates continue showing signs of stabilization or further decrease.
With existing home sales faltering during the same period, builders find themselves at an advantageous position to cater to unmet buyer demands through both ongoing projects and those yet to start construction.
Read more about December’s promising new home numbers at Realtor.com, here.
That’s all for today, but we’ll be back tomorrow with your daily dose of the commercial real estate stories you need to read. See you soon.
