Construction activity in Manhattan is the highest it has been in over two decades. The resurgence of new development will have a substantial effect on the overall market in terms of both vacancy rates and pricing.
• Delivery of new product usually causes a spike in vacancy and in average asking rents—particularly in older/less desirable buildings.
• Newly-constructed space typically commands a rent premium over other class A properties.
Surprisingly, New York City’s inventory has remained nearly stationary since the early 1990’s. Residential conversions and the loss of the World Trade Center buildings in 2001, among other factors, have offset the square footage added to the market over the last 10 to 15 years. New York City is now in the beginning stages of inventory expansion with several projects recently delivered and currently under construction. Between 2013 and 2014, more than 6.5 million square feet (msf) of new office construction will be completed in Manhattan—representing the largest amount of new construction to hit the Manhattan market since 1989 when nearly 7.8 msf was delivered.