Class B Manhattan offices are becoming hot — and scarcer — commodities.
A flight-to-quality to premium Class A offices has boosted demand for upper-tier Class B buildings across Manhattan, eating into the supply of the best aging towers, the Commercial Observer reported.
“I would say one-third of our properties are 100-percent rented,” Jeff Buslik, executive managing director at Adams & Company, a locally based brokerage with 36 Class B buildings, told the publication.
Demand for offices is booming across Manhattan, with leasing volume at 12.2 million square feet in the first quarter ending in March, the most since late 2019. The leasing boom comes as workers flood back to offices, with one in four employers planning to jack up office attendance.
Class A trophy towers such as One Vanderbilt and 425 Park Avenue are fully leased — with little new construction ahead.
While 3.5 million square feet of new offices are expected to open across Manhattan before 2030, much of the Class A space is spoken for, including J.P. Morgan Chase’s future headquarters rising at 270 Park Avenue.
A tighter Class A market means more demand for the best Class B offices in older, less flashy buildings. At the same time, the Class B supply has tightened due to an increasing number of office-to-residential conversions.
“There’s a confluence of events going on,” Michael Cohen, managing principal of locally based Williams Equities and president of Colliers’ New York tri-state office, told the Observer.
“There’s a diminished pool of B buildings as conversions occur,” he said. “There’s also a diminished pool because of certain buildings whose financial circumstances don’t permit them to transact. But, I do think, if we’re looking for an explanation, the simplest explanation is just recovery through demand for Class B.”
The borough’s overall office availability was 18 percent on April 1; the Manhattan market had 600 million square feet of offices in total, as of last spring.
At the same time, Class B leasing totals for last quarter and the third quarter topped 2 million feet — the first time since the start of the pandemic Class B eclipsed the 2 million mark two out of three consecutive quarters, according to the Observer.
The volume of offices available for sublease, meanwhile, had eight straight quarters of decline, hitting 3.33 million feet, the lowest since July 2020, according to Colliers.
As CBRE broker Mary Ann Tighe said last year, space is getting scarcer and sweetheart pandemic deals are off the table. “If you are a tenant of 100,000 square feet or greater, you should’ve done your deal already. By the time we get to ’27, you’re going to have a problem,” she said.
In December, WeWork signed a Class B lease for 303,700 square feet at 330 West 34th Street on behalf of Amazon.com — a deal that Cohen described as “the canary” for renewed Class B strength.
— Dana Bartholomew
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