Blackstone, the world’s largest alternative asset management firm, is making significant investments in Manhattan’s office market, signaling a remarkable resurgence in the sector following the COVID-19 pandemic. With vacancies in A-plus-class buildings dropping to under 10% and overall availability stabilizing between 16% and 17%, the demand for prime office space in Manhattan has grown increasingly competitive. This trend marks a dramatic turnaround for an area that many had deemed “dead” after the pandemic’s initial impact.
The revitalization of the Manhattan office market is further underscored by the recent lease signed by law firm Paul Weiss, which will occupy 765,000 square feet at 1345 Sixth Avenue starting in 2027. This lease represents the largest transaction of 2023, showcasing a significant shift in tenant confidence and interest in high-quality office spaces.
Recent improvements to the building at 1345 Sixth Avenue, which underwent $120 million in capital enhancements, have contributed to its appeal. Currently, the building boasts a leasing rate of over 92%, with notable tenants including Intercontinental Exchange, Canyon Partners, and Fortress Investment Group. The swift leasing activity indicates that space within this prime location is highly sought after.
Despite overall leasing volume in Manhattan at 35.9 million square feet in 2024 being just 10% below figures from 2019, industry experts indicate that the current demand outstrips pre-pandemic levels. Notably, office space demand in November exceeded that of 2019 for the first time since the onset of COVID-19. Additionally, the sales of office buildings have shown signs of recovery, even though they remain below 2019 totals.
A record-setting number of leases has emerged in 2024, with 28 new leases signed at rents exceeding $200 per square foot. Furthermore, a total of 212 leases were inked for at least $100 per square foot during the same period, highlighting a robust appetite for premium office space.
Stephen B. Siegel, head of global brokerage at CBRE, acknowledged the significance of these developments. He stated, "VTS is correct," referring to data suggesting a strong rebound in leasing activity. He also emphasized the value of the building at 1345 Sixth Avenue: “It is a great asset with stabilized occupancy once Paul Weiss moves in.”
However, industry insiders warn that the current market conditions won’t last long. An unnamed investment-sale broker remarked, “There are a lot of bargain hunters out there but they’d better move fast because the bargains won’t last.” This sentiment resonates with many investors who see potential opportunities as the market continues to stabilize and recover.
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