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New Yorkers are now in the office nearly half as much as they were pre-pandemic, with the city's in-office recovery rate hovering within a single percent point of 50%, according to data from real estate technology firm Kastle Systems. The city's return to the office rate is trailing other major US regions, including Houston, Austin, Chicago, and Dallas. However, New York's in-office recovery is slightly higher than that of Los Angeles, Philadelphia, San Francisco, San Jose, and Washington D.C. The peak in-person workday for New York offices is Tuesday, with foot traffic at 61.8% of prepandemic levels. On Fridays, the least busy day is Friday, with just 25.2% of people working in the office compared to 2019. New York's office occupancy rate reached a near record high the week ending Sept. 20, when offices saw 50.1% of their prepandemic numbers. The data from Kastle Systems represents commercial office buildings equipped with Kastle Systems security technology in 10 major US cities.
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Manhattan's office market experienced a 57.8% increase in leasing activity in October, with firms leasing about 2.6 million square feet of space, a 63.2% increase year over year. The majority of this activity came from four major leases, each for over 100,000 square feet. These deals included the city extending its downtown lease at 150 William St., Ralph Lauren renewing its 256,000-square-foot Midtown South lease at 601 W. 26th St., Weill Cornell renewing and expanding its 216,000-square-foot lease at 575 Lexington Ave., and LinkedIn expanding its 144,000-square-foot lease at the Empire State Building. However, Manhattan's year-to-date leasing remains 16.1% lower than at the end of October 2022, at about 21.6 million square feet. The borough's available supply since Covid hit the city in March 2020 has grown by 78.8% to reach about 96.3 million square feet. The average asking rent increased by 1.3% year over year to $75.40 per square foot, but this was still 5.1% lower than its March 2020 average of $79.47 per square foot.
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Stroock & Stroock & Lavan, a prominent real estate law firm, is set to dissolve after 30 of its real estate partners left for rival firm Hogan Lovells. The firm, which represented the Real Estate Board of New York, was the No. 8 real estate law firm in New York City based on transaction volume. It also held merger discussions with Steptoe & Johnson, McGuireWoods, Squire Patton Boggs, and Nixon Peabody, but no deals were reached due to pension issues. Law firms have been a significant player in the office leasing market in New York City, with many companies opting to bring their attorneys back to their desks. In the first quarter of 2023, law firms leased 3.6 million square feet around the country, the most for any first quarter on record. Many of the top deals in the pandemic era have been signed by law firms, such as Paul Hastings renewing and expanding to 277K SF at 200 Park Ave. and Freshfields Bruckhaus Deringer signing a 15-year lease for 180K SF at 3 World Trade.
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Brokerage loses office and logistics listings
Brookfield Asset Management has fired Cushman & Wakefield from its marketing responsibilities for its office and logistics space in the US. Cushman was tasked with marketing prominent Manhattan office spaces, including 660 Fifth Avenue and Manhattan West. The brokerage is currently in a cost-cutting mode due to the industry freeze in property transactions over the past year and a half. Cushman's revenue fell 9% year-over-year in the third quarter. Brookfield shares were up over 5% on Thursday afternoon, while Cushman shares showed signs of volatility. Cushman also lost a team of sales brokers to Newmark, with Dan O'Brien, Eric Roth, and Maurice Suede leaving for a new sales team focused on smaller institutional deals. This move comes months after the seven-year run of Doug Harmon and Adam Spies at Cushman ended, as they also jumped to Newmark. The pair brokered some of New York City's biggest deals during their time at Cushman.
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Clarion Partners has sold 100-104 Fifth Ave. near Union Square for $127 million, a 45% decline in a decade. The deal, which closed on October 23, was financed by Sovereign Partners, which borrowed $81.5 million in acquisition funding from a limited liability company in Englewood Cliffs, New Jersey. The building, which is 93% leased to blue-chip tenants like Adobe, Timberland, and Brown Harris Stevens, appears in good shape. However, the office sector has been struggling since the Covid pandemic, with Manhattan having an availability rate of around 18%. City Comptroller Brad Lander estimated that office values could tumble 40% by 2029, but lost tax revenue could be only 1.4% of the total city tax stream.
Mayor Eric Adams has called for rezoning 42 blocks of the western side of Midtown to open the door to conversions. Sovereign Partners has a knack for identifying overvalued local office towers, as seen in the recent acquisition of 126 E. 56th St. from Pearlmark Real Estate Partners for $113 million. Other tenants at the building include New Enterprise Associates, a venture capital firm with dozens of startups, and brokerage Brown Harris Stevens.