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Commercial Market Much Stronger Than Headlines Imply
October 9, 2019
Over the past decade, New York City has experienced a period of strong economic growth driving an increase in jobs, commercial investment, and unprecedented demand to live and work in the five boroughs.
As a result of this economic expansion, our commercial real estate market continues to thrive and poised for success for the remainder of 2019 and beyond despite a spate of recent headlines.
Several news reports about WeWork and its plans for an initial public offering have driven concerns over the future of the City’s commercial real estate market.
However, data clearly show that the issues the company is facing will have little impact on the market in the short- or long-term.
That’s not just because WeWork — which leases and operates flexible spaces in Manhattan and across the five boroughs — makes up just one percent of the commercial market, or that flexible office space itself only comprise less than foru percent of the nearly 550 million square feet market.
In addition, there have been 11 consecutive quarters of increasing office leasing activity in New York City.
In the third quarter of 2019, Manhattan leasing activity jumped 18.4 percent from the same period last year. From July through September of 2019 alone, 10.6 million square feet of space was leased in Manhattan, about eight percent above the five-year quarterly average.
These numbers demonstrate the fact that employers and employees alike are driven to the flourishing New York City economy.
The latest data released by the New York State Labor Department shows that the private sector grew by over two percent year-over-year from 2018-19, adding 84,200 jobs through the end of August 2019. These figures—which include the fact that seven industry sectors added jobs—are above comparable rates at both the state and national level.
The data, when coupled with unemployment that remains low, demonstrate that the job market and private sector remain as strong as ever.
That success is attracting professionals the world over to New York City, which is expected to reach a population of 9 million by the year 2040, per the latest projections. Many of the country’s largest companies are noticing.
Consider tech giant Google, which is planning to double its New York City workforce to 14,000 after investing $1 billion in its New York City campus.
Google’s Vice President of Engineering, Aparna Pappu, told NY1 just last month that the company believes its New York City base will continue to “attract a full slate of talent,” many of whom are not compelled to move to Silicon Valley.
Pappu herself dreamed of working in New York since the first time she visited and noted that many people “love working in cities.”
The recent explosion in New York City’s tech industry, which has grown by 12 percent over the last two years and even more across the last decade, is proof that Google’s intuition is born of real trends.
As Oxford Properties’ Kevin Egan told the Wall Street Journal this summer, “These [tech] employees want to be here and need to be here”, which is causing “employers to set up shop [in New York City] to lure that talent.”
We also shouldn’t confuse the internal issues at one company with the larger idea of co-working as a business model.
The co-working sector is here to stay as demonstrated by the number of major players in this space.
Co-working businesses are underway at a number of REBNY member firms such as Tishman Speyer, Silverstein, Brookfield, and Durst each of who are among the most successful commercial owners in America.
Add this all up and it becomes clear that New York City’s commercial real estate market is booming — a far cry from the recent “sky is falling” reports we’ve seen.
The truth is our economy is strong, professionals and their employers continue to be pulled to the five boroughs, and the underlying trends are encouraging.
That is good news for all New Yorkers.