Space Being Leased by Office Tenants Averaging 14% Less than Before the Pandemic

Some recently released national leasing data painted what JPMorgan described as a sobering picture, as a combination of office tenants taking on average 14% less space than before the pandemic and the renewal of more than half of leases signed before 2020 yet to come up for renewal threatening to keep vacancy rates elevated into 2027. Concessions in New York buildings are estimated to be 70% higher than before 2020, typically including free rent of up to 14 months for a large 10 or 15-year lease; and effective rents are down as much as 20% in non-trophy buildings after accounting for tenant improvement and other costs. However, the Manhattan office market is starting to see “a leveling” of concessions as demand for premium space picks up. Other positive signs include in increase in “known tech demand” after shrinking their office footprints in recent years; and in contrast to prepandemic times when the space per employee was tightening, companies are now giving workers more workspace.