One out of every five New York City commercial spaces currently sit empty. Post-pandemic vacancies have reshaped Manhattan and this country as we know it.
The rental forecast for commercial spaces remains grim as city officials warn Manhattan’s abnormally high vacancy rate should persist well into 2026. As of August 2023, Manhattan is currently at 22.7% office vacancy with little hope of recovery anytime soon.
New York City commercial vacancy rates typically hover at a steady 11%, but as the pandemic continued into the early 2020s, those rates climbed to 15% and beyond. Currently, the national average for 2023’s first quarter is 18.6%, with cities like Denver and Seattle squarely at 20% vacant.
For many, these vacancies hit close to home- shuttered bodegas, struggling independent shops, and the loss of retail storefronts continues to alter the dynamic of neighborhoods throughout the city. Look closer, and empty offices bleed into transport as well; rush hour subways are only half full, a far departure from an overcrowded past.
Lower and midtown Manhattan and downtown Brooklyn have seen the highest turnover and climb in vacancy rate changes to speak of. Despite receiving the most COVID-19 grant and loan money, businesses and offices continue to empty out.
Manhattan’s Troubled Rental Landscape
Spikes in vacancy affect not only landlords and building owners but the city as well. One of New York’s most important revenue sources is property taxes. Nearly 20% of New York City’s total tax revenue comes from commercial property taxes, with 10% attributed straight to office building rentals. In the first quarter of 2023, 4.6 million square feet were leased in the city, while asking rents for offices in NYC were priced at $78.35 per square foot. In April 2023, the price was at an average of $75.13 per square foot, down 50 cents in a YoY comparison, according to a Colliers market report.
OFFICIALS ESTIMATE THAT OVER HALF OF MANHATTAN’S 450 MILLION SQUARE FEET OF OFFICE INVENTORY IS PRACTICALLY OBSOLETE.
Manhattan isn’t an easy place to open a business. Especially for family-owned shops, the regulatory hoops, and hurdles of rising rent, taxes, and industry competition challenge even the most genuine intentions. Inflation has taken its toll and led to genuine change across the city landscape. Take a walk down Third Avenue in midtown and you can see for yourself. Empty storefronts and boarded windows have sucked the magic out of New York’s once-energizing presence.
How Much NYC Office Space Is Actually Being Used? How Much Is Under Construction?
A major contributing factor to vacancies is the underperformance of aged commercial spaces. The shift into remote working left many businesses reconsidering their needs and desires for office space. Pandemic downtime made room for major remodels and full or partial fit-outs as companies dreamed of an eventual return to normalcy. The demand for older buildings- many with poor energy performance and outdated design- began to plummet, leaving skyscrapers and roadside shops alike empty around the city.
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