New York City Office Investment Forecast
Market Maintains Rapid Supply Growth Despite High Vacancy;
Investors Waiting For Reopening Offices
Metro office fundamentals face a protracted recovery. New York City's submarkets maintain bifurcated metrics entering this year. Core submarkets in Manhattan and Brooklyn that recorded the sharpest declines in asking rent through the health crisis observed fundamentals lagging behind pre-2020 norms. The Bronx, much of Queens and Outer Brooklyn reported rents close to or even surpassing pre-pandemic peaks. Rent growth headwinds in the areas most impacted by lockdown measures could persist as employers may find that a hybrid workforce is more economical in high-cost submarkets. Over one-third of New York City employers expect a decreased need for square footage over the next half-decade, signaling remote work as a lingering negative demand factor for office space. However, metro stock continues a phase of rapid expansion. Developers are projected this year to finalize the second-highest amount of square footage in an annual period since 2007. Of the 8.8 million square feet set to open in 2022, 5.8 million stem from two amenity-rich developments located in the Hudson Yards district. As of the beginning of this year, the majority of this space remained unleased. Brisk inventory expansion will create downward pressure on rent growth as the office sector continues its recovery.