As we reflect on the New York Metro’s 2023 journey in both retail and office sectors, it’s clear that challenges persist but so do opportunities. While the office market declined the retail scene showcased resilience.
New York Office Sector
Over the past year, the NYC office market remained in decline, with muted leasing and high availability. According to Costar’s data for Q3, the leasing activity is at a record-low, mainly due to tech sector weakness and minimal job growth in office-using industries.
Lingering vacancies persist as 330+ buildings have over 100,000 square-foot available over the last two years. The vacancy rate rose by 1.5% and sublet space is record high with 27.6 million square-feet.
Although there is a downturn, certain sectors like law and finance are seeking space in top tier Class ‘A’ buildings like One Vanderbuilt. Significant leasing occurred in buildings with substantial upgrades, signaling flight to quality, especially in 5-star buildings, which saw positive absorption.
New York Retail Sector
New York’s retail vacancy rate remains at 4.1% aligning with current U.S. averages. While some department stores struggled causing negative absorption, the annual absorption is not.
The City’s retail scene benefits from better business conditions, marking the highest growth in five years according to NYC Economic Development Corporation. Lower rents and increased foot traffic entice dining and apparel tenants in smaller storefronts.
Most submarkets saw availability rate drops, attracting major players like Target, Shoprite and Hobby Lobby due to strong consumer spending.
Prime shopping areas like SoHo witnessed intense competition for visible storefronts. Large deals continued, including fitness centers, grocers, and high-end apparel brands like Louis Vuitton.
Overview
Looking ahead at 2024, there is a glimmer of hope for rates and pricing to ease potentially aiding sectors that have faced struggles akin to the New York Office sector. Despite the downturn, certain niches like law and finance sought prime spaces indicating flight to quality in the office market.
Similarly, the retail sector for New York has maintained stable with pockets of growth, benefitting from business conditions and robust consumer spending.
As we step in the new year, the City’s real estate landscape stands at an intriguing crossroads, where challenges and opportunities intersect. We anticipate the unfolding narrative and potential resurgence in both the retail and office sectors as the year progresses.
All information in this article is courtesy of Costar.
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