Prepared by Richard Plehn, Lisa Ann Pollakowski and Vanessa Ollarves.
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SUMMARY OF THE COMMERCIAL OFFICE MIDTOWN MARKET – Q3 2024
NEW YORK CITY ECONOMY
The United States’ monthly civilian labor force for September 2024 was 168.6 million, an increase from 167.8 million in 2023. However, unemployment increased to 7.2 million (4.1% unemployment rate) in September 2024 from 6.2 million (3.7% unemployment rate) in September 2023 .
NYC’s monthly civilian labor force for September 2024 is 4.3 million, an increase from September 2023’s 4.2 million. However, unemployment increased to 227,900 (5.3% unemployment rate) in September 2024 from 218,400 (5.2% unemployment rate) in September 2023. Although employment is increasing in NYC, the new jobs are predominantly in lower-paying industries.
The U.S. 10-year treasure bill decreased to 3.74% in September 2024 from 4.61% in September 2023. As a result, company valuations will increase, helping real estate owners and companies refinance debt at a lower rate.
ASKING RENT VS. AVAILABILITY
The availability rate went down from 17.2% in Q3 2023 to 16.3% in this quarter (-0,9%); the average rental price has also decreased from $50.59 to $50.39, representing a decrease of ($0.40).
THE AVAILABILITY RATE COULD BE 13% TO 15%, NOT 16.3%
The Q3 2024 market data does not consider the following buildings slated to be converted to residential or buildings that are in foreclosure. An estimated 10,000,000 rsf office buildings are being converted or are in foreclosure. If the 3Q 2024 data set considered this, the availability rate would be between 13% and 15%.
LEASING ACTIVITY 3Q 2024 WAS GREATER THAN 2Q 2024 AND 3Q 2019
Leasing activity in Midtown for Q3 of 2024 was 6,582,625 rsf, an increase of 418,172 rsf from Q2 of 2024. Midtown leasing activity increased by 1,040,194 from 3Q 2019.
THE PLAZA MARKET CONTINUES TO HAVE THE MOST LEASING ACTIVITY
The Plaza district dominates the leasing activity out of all the submarkets, with 2,609,333 sf representing 39.64% of the market, Penn Plaza/ Garment had the second most leasing with 1,392,720 (21.16%) and lastly Grand Central had the third most leasing with 1,046,254 representing 15.98%.
FLIGHT TO QUALITY
As noticed in previous quarters, leasing activity is dominated by Class A buildings, representing 81.5% of leasing. The number of leases in Class A buildings increased from 3.4 million in Q3 2023 to 5.4 million in Q3 2024, higher than in Q3 2019, when it was 4.0 million.
FIVE LARGEST DEALS COMPLETED
All five largest deals exceeded 200,000 sf, were renewals, and were Completed in Class A buildings. Four out of the five deals were expansions, and only one remained with the same square footage.
CONCESSION PACKAGES INCREASED FROM Q2 2024 TO Q3 2024
The concession package free rent plus landlord contribution) in Q3 2024 was $226.28 versus $212.98 in Q2 2024. The Q3 2024 free rent was 10 months and 15 days versus 9 months and 29 days in Q2 2024 (assuming a 30-day month). The landlord cash contribution towards tenant’s build out for Q3 2024 was $157.47 versus $151.51 in Q2 2024.
SUMMARY
Plaza District tenants who cannot find space in the Plaza District have started to lease space in other submarkets in Midtown.
