JLL Market Analysis Shows Areas of Strength in New York City Leasing Market
Tech Leasing Continues as Class-A Space, Newly Constructed Space and Hudson Yards Demonstrate Post-COVID Resiliency
NEW YORK, December 22, 2020 — A new market analysis produced by JLL reveals significant areas of strength in the New York City office leasing market despite the COVID-19-related social and economic disruption that has affected the city in 2020. In particular, tech leasing continued as Class-A space, newly constructed space and Hudson Yards demonstrated remarkable resiliency.
The analysis showed that the Class-A market segment was responsible for a full 96 percent of total leasing volume in the third quarter of 2020. Average rents for Class-A space grew from $79.56 per square foot in 2018 to $86.21 per square foot in 2020. Meanwhile, new construction achieved the highest rent growth, rising from an average of $94.97 per square foot in 2018 to $112.89 per square foot in 2020.
The analysis also highlighted the impact of a diversified tenant base in New York City. While financial services tenants accounted for 37 percent of 2006-2008 leasing activity, this sector dropped to 26 percent of leasing in 2017-2019 and decreased further to 25 percent after COVID. Conversely, tech activity has grown steadily from the 3 percent of leasing this sector represented in 2006-2008, and was responsible for nearly 25 percent of total leasing activity after the onset of the pandemic.
Tech leasing in new construction was particularly striking in 2020, further cementing the sector’s long-term importance in the New York City market. Despite the continued pandemic-related remote-work trend, tech leasing accounted for 54.3 percent of leasing in new construction in 2020 and a full 76 percent of activity in new construction in the third quarter. Facebook’s 730,000-square-foot lease at the Farley Building represented 69 percent of new construction activity in the third quarter.
The JLL analysis reveals that Hudson Yards, specifically, has consistently outperformed other submarkets as large tenants committed to new construction. Pre-leasing has allowed the district to remain stable, with a current vacancy rate of only 3.3 percent compared to other city submarkets that average close to 10 percent. Given underlying markets dynamics, Hudson Yards stands to perform very well even during this period of disruption.
“While the pandemic has created a series of challenges, there are remarkable pockets of strength in the New York City office leasing market,” said Peter Riguardi, chairman and president, New York tri-state region, with JLL. “The demand for new construction, in particular, has created powerful momentum for high-quality, newly constructed space.”
Frank Doyle, vice chairman, international director, with JLL, said: “This analysis points to resiliency in the office market that will be led by tech tenants and by high-quality newly constructed and newly renovated space. Remote and hybrid work models will not end in 2021, but surveys have shown that productivity is dropping at the same time that employers are struggling to train and integrate new personnel. It is increasingly clear that there will be a distinct advantage for companies whose employees work in the office when we move past COVID.”
“New York City’s diversified tenant base, led by fast-growing technology companies, will continue to support office leasing as we move past current circumstances to a more stable environment,” said Clark Finney, managing director, with JLL. “The industry continues to address the future role of remote work, but recent leasing has demonstrated the critical role of in-person collaboration, mentoring and work culture as we look toward a future in which continued innovation will remain critically important.”
JLL is a leader in the New York tri-state commercial real estate market, with more than 2,600 of the most recognized industry experts offering brokerage, capital markets, property/facilities management, consulting, and project and development services.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion in 2019, operations in over 80 countries and a global workforce of over 92,000 as of September 30, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.