Manhattan Construction Starts Plummeted in 2023

At the end of 2023, the nation’s biggest office market was still struggling with new office supply. Nevertheless, Manhattan maintained its position as the priciest market, leading the nation in terms of average sale price per square foot. The metro’s overall deal volume last year was the highest in the country.

As of December, 6.9 million square feet of office space was underway in Manhattan across 13 properties, accounting to 1.4 percent of existing stock—lower than the national average of 1.7 percent. Among gateway cities, Chicago recorded the lowest figure at 0.5 percent, while Seattle led with 5.5 percent.

Manhattan’s under-construction stock in December exceeded that of Washington D.C. (4.1 million square feet) and San Diego (5.5 million square feet), but was lower than in San Francisco (7.3 million square feet), the Bay Area (8 million square feet) and Seattle (9.8 million square feet). Across peer markets, Boston had the most office space underway, totaling a whopping 15.7 million square feet.

Significant office developments underway include JPMorgan Chase’s 270 Park Ave., a 2.5 million-square-foot, Class A+ mid-rise in the Plaza District. The company’s new global headquarters topped out in November 2023, with completion scheduled for late 2025.

Construction starts fell sharply

In terms of deliveries, the metro registered 6.3 million square feet of completed office space across eight properties in 2023. In July, Brookfield Properties completed Two Manhattan West, a 2.1 million-square-foot high-rise. The building is the second of four office towers that are part of the developers’ Manhattan West project. In late 2023, Brookfield landed Spanish bank BBVA as a tenant for 74,000 square feet.

Another important delivery was Vornado Realty Trust’s completion of PENN 2, a 1.8 million-square-foot building in Midtown. The property is part of the PENN DISTRICT, a 10 million-square-foot master-planned community and went through a complete renovation totaling $750 million that was finished in late 2023. Recently, Cushman & Wakefield was appointed as exclusive leasing agent of the upgraded building.

Construction starts in 2023 totaled 400,000 square feet across two properties, representing a significant drop compared to 2022’s 1.8 million square feet. 

Taconic Partners’ life sciences subsidiary Elevate Research Properties, along with Nuveen Real Estate and Flatiron Equities, is developing the 200,000-square-foot Iron Horse Labs in the Plaza District, according to NewYorkYIMBY. The project consists of the renovation and expansion of an existing 69,000-square-foot structure and its adjacent garage property, to be transformed into a Perkins & Will-designed research laboratory. Barrings provided a $78.6 million construction loan, according to CommercialEdge. The project broke ground in October 2023 and completion is scheduled for 2025.

Rolex‘s new 28-story headquarters at 665 Fifth Ave. will encompass roughly 200,000 square feet of office and retail space. Foundation work commenced in December, with Pavarini McGovern as general contractor, David Chipperfield Architects as designer in charge and Adamson Associates as executive architect. Designed to achieve LEED Platinum certification, the tower is scheduled for delivery in 2025. 

Sales volume picked up, prices high

Year-to-date through December, investment volume in Manhattan totaled $2.7 billion, with 3.5 million square feet of space changing hands. By comparison, deals totaled $6.0 billion in 2022. At the end of the first quarter, the volume reached $682 million, while during the second and third quarters numbers dropped. Nevertheless, there were $1 billion in office investments recorded in the fourth quarter, pushing Manhattan to the nation’s forefront in terms of 2023’s total sales volume.

The metro was followed by Los Angeles ($2.4 billion), Washington D.C. ($2.1 billion), Boston ($1.6 billion) and the Bay Area ($1.3 billion). Across gateway markets, the lowest sales volume was recorded in Baltimore, where 21 properties changed hands for $191 million.

In 2023, the average price of office properties in Manhattan was $833.93 per square foot, the metro maintaining its position as the most expensive U.S. market. The national figure clocked in at $194.78 per square foot.

One of last year’s notable office deals in Manhattan was Prada’s $835 million portfolio acquisition that closed in December. The sale included 724 5th Ave., a 65,010-square-foot, 12-story Class A office building where Prada occupied five floors since 1997, as well as 720 5th Ave., a 113,292-square-foot asset, where the new owner is planning its expansion.

Another important transaction was Hyundai’s $273.5 million acquisition of Fifteen Laight, a 110,945-square-foot mid-rise in Tribeca. The Class A property was completed in 2021 and will serve as Hyundai’s new office and showroom in New York. The deal closed in February 2023, with Vanbarton Group as seller.

Largest office lease in 2023 closed in Manhattan

As of December, the metro maintained its position as the most expensive market for office leasing, with an average of $70.00 per square foot and marking an 8.0 percent decrease year-over-year. Other gateway cities with high listing rates were San Francisco ($61.91), the Bay Area ($54.23) and Los Angeles ($41.67).

The largest office lease of 2023 remains law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP’s 20-year, 765,000-square-foot commitment at 1345 Avenue of the Americas. The approximately 2 million-square-foot tower is owned by Fisher Brothers and institutional investors advised by J.P. Morgan Global Alternatives. The 50-story property underwent multiple cosmetic renovations throughout the years, with the latest one being a $210 million capital improvement program implemented in 2021.

Tishman Speyer and Irvine Co. signed an 11-year extension with MetLife at 200 Park Ave., a 3.1 million-square-foot skyscraper. The insurance company re-committed to the 400,000 square feet it has been leasing and will maintain its headquarters at the 58-story office building through 2038.

Another significant deal was PJT Partners’ renewal and expansion: the investment bank signed a 15-year, 270,000-square-foot commitment at 280 Park Ave., a 43-story tower in Midtown. The property is owned by SL Green Realty Corp. and Vornado Realty Trust.

A hotspot for coworking

As of December, Manhattan had the biggest flex office stock in the country at 9.5 million square feet, followed by Los Angeles (4.5 million square feet), Washington D.C. (3.3 million square feet), Chicago (3.1 million square feet) and Boston (2.7 million square feet).

The metro’s share of coworking space as percentage of total leasable office space reached 2.5 percent, surpassing Los Angeles (2.2 percent), Chicago (1.9 percent) and the national figure of 1.7 percent. Among gateway markets, Miami led with 3.5 percent.

Year-to-date through December, WeWork had the largest coworking footprint in Manhattan, with its locations totaling 5 million square feet. The company was followed by Industrious (807,368 square feet) Regus (772,479 square feet), Convene (550,612 square feet) and Spaces (432,839 square feet).

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