New Trend in Commercial Real Estate; Big NY Firms Taking on Less Office Space
As a result of the COVID-19 pandemic, a new trend is developing in commercial real estate. To the dismay of landlords, more and more large New York City-based corporations are reducing their large office rents. Photo credit: Wikipedia.org
By: Benyamin Davidsons
As a result of the COVID-19 pandemic, a new trend is developing in commercial real estate. To the dismay of landlords, more and more large New York City-based corporations are reducing their large office rents.
As Crain’s NY reports, records released last week by many of New York’s largest employers revealed that many large corporations cut their office space over the past year. JPMorgan Chase, who has been the city’s largest commercial tenant for many years, has reduced 300,000 square feet of office space to SF9.1 million, according to its annual report released in late February. Wells Fargo cleared 5 million square feet of office space nationwide, leaving SF 78 million. The Bank of New York Mellon reduced its national footprint by 800,000 square feet to SF 6.5 million. Goldman Sachs is now leasing 6.6 million square feet, compared to 6.8 million nationally. Last week, HSBC Bank announced that it would reduce its office space by around 40 percent in the coming years.
The trend doesn’t just apply to NY-based banks. Last year, IBM cut 1 million square feet of space across the country. AIG closed 21 domestic offices and kept 146. S & P Global rented six fewer offices across the country, reduced its total to 28 offices and sold one of two office buildings in the US The needs of our customers and employees continue to feed into our strategic real estate decisions, ”said S & P.
The worrying news suggests that commercial landlords and builders will suffer. NYC’s Independent Budget Office predicts that property taxes will fall by $ 1 billion this year as “commercial property valuations have fallen sharply.” Real estate firm Savills found that more than 15 percent of Manhattan’s 450 million square feet of office space was available by the end of 2020, up from 11 percent the previous year. Average asking rents for Class A office space in Manhattan fell from $ 98.94 to $ 90.42 per square foot. Savills believes the bad news will continue with “significant downward pressure through 2021”.
The concept of reducing back office space to cut costs is not new. For nearly 30 years, financial institutions have been moving mid-sized employees to other cities to cut spending. “The pandemic will accelerate that process,” said Kathy Wylde, managing director of the partnership for New York City.