2.15.23 - Manhattan has 13 million square feet of office space under construction despite sector’s woes
' Manhattan is already struggling to figure out what to do with its current glut of office space, but the borough also needs to prepare for about 13 million additional square feet of cubicles to arrive–the most in the country.
The amount of office space under construction in Manhattan in the first quarter leads 25 major markets across the U.S., according to a report from CommercialCafe. The largest project expected to arrive this year, both in the city and across all 25 markets, is 2 Manhattan West from Brookfield, close to Hudson Yards, which spans 2 million square feet, followed by Vornado's Penn 2 project, near Penn Station, spanning about 1.6 million square feet.
Brookfield has already landed deals at 2 Manhattan West with companies including law firm Cravath, Swaine & Moore, which signed a 481,000-square-foot lease to be the building's anchor tenant, along with accounting firm KPMG and hedge fund D.E. Shaw, according to the CommercialCafe report.
Vornado's Penn 2 should be finished by the end of the year. CEO Steven Roth stressed on the company's earnings call yesterday that Vornado had prefunded the project, and it will be delivered "free and clear and unencumbered," according to a transcript. He touted the market's "outstanding" reaction to the project but also acknowledged the firm would be trying to lease it up at relatively low rents.
"Our strategy here is to achieve very strong returns at rents well below those required for new construction," he said.
All five of the largest office projects across the 25 markets were in Manhattan. SL Green's 1 Madison Ave. came in third at about 1.4 million square feet, followed by the 1.3 million-square-foot Googleplex at 550 Washington St. and the roughly 1.3 million-square-foot Terminal Warehouse Redevelopment. The first non-New York project to make the list was Amazon's second headquarters project in Arlington, Virginia, which will run about 1.2 million square feet. Amazon had also planned to build part of HQ2 in Long Island City before infamously pulling out of the deal.
Boston was close behind New York with about 12.7 million square feet of office space under construction, but there was a steep drop-off after that. Austin came in third, at about 7.7 million square feet, followed by Dallas, at about 7.5 million square feet, and the Bay Area, at about 6.5 million square feet.
Manhattan's availability rate for office space was 16.9% in January, according to a report from Colliers. The borough had about 91.3 million square feet of available office space in total last month, a 69.4% increase since March 2020, when the pandemic first hit the city.'