New York office insight - Q3 2018
As job market indicators such as the unemployment rate and office using jobs reach cyclical lows and record highs, respectively, companies are investing more in employee attraction and retention while emphasizing workplace strategies. Manhattan office fundamentals have capitalized on these trends, causing the Midtown core vacancy rate to reach a 10-year low while Midtown South became the most supply-constrained CBD in the country.
Flexible space providers continued their expansion in the New York City market, highlighted by WeWork’s258,344-square-foot lease at 21 Penn Plaza. In the third quarter, this segment contributed to approximately 24 percent of leasing activity and four of the ten largest deals.
Investment volume rebounded in the third quarter, increasing the likelihood that year-end dollar amounts may match or surpass the prior 10-year annual average of $27.9 billion. Continued upward pressure on the benchmark 10-year Treasury rate should cause office cap rates to escalate in the coming quarters, though foreign interest has remained elevated and diversified.