Telecom giant Verizon has put its entire office space in the Essex Crossing mixed-use development on Manhattan’s Lower East Side up for sublease as hybrid and remote work combines with economic challenges to boost New York City's office vacancy rate.

Verizon just two years earlier signed for 143,000 square feet in a high-profile deal to occupy the third through fifth floors of 155 Delancey St. at the development, according to CoStar data and marketing materials, which list CBRE as the exclusive sublease agent.

The anchor office space features among other things large floor-to-ceiling windows along a contiguous block, according to the marketing materials, adding it's available for “immediate possession” with flexible terms through March 2043. Verizon’s 20-year lease expires in April 2043, according to CoStar data.

Courtney Mezinis, head of Verizon’s global real estate, and spokespeople for Essex Crossing didn’t immediately respond to CoStar News requests seeking a comment. Evan Haskell, an executive vice president at CBRE, declined to comment. The Real Deal earlier reported the move.

Verizon’s decision to sublease arrives as the pandemic-driven schedules of employees working just some days in the office, higher interest rates and companies looking to cut costs are curbing demand in some major office markets. Vacancy rates in New York and the United States have shot up to what CoStar data shows as record highs of about 14% each.

Manhattan’s net sublet availability in November rose for the first time since May by 51,000 square feet in November to 20.75 million square feet, Colliers said in a newly published Manhattan office report, adding the market’s total sublet inventory has expanded by 74.3% since March 2020.

Manhattan’s November availability rate, meanwhile, rose to a record high of 17.9%, matching the record-high in September, Colliers said, adding the asking rent average was $75.02, 5.6% below the March 2020 average of $79.47 square feet.

"A hybrid work arrangement is cost-effective for occupiers, as it allows them to support more workers with less space," according to a CoStar analysis. "

Security firm Kastle Systems’ data, tracking key card swipes, shows the office utilization rates in a 10-city average, including New York, haven’t seen any sizable change after rising to about 50% of pre-pandemic levels.

The Real Estate Board of New York said Tuesday Manhattan’s average office visitation rate, based on Placer.ai’s mobile location data, in October rose to 70% from 66% both in September and a year earlier. Meanwhile, major employers surveyed by business group The Partnership for New York City have said office attendance won’t see any big jump for “the foreseeable future.”

As for Verizon, some of its marketing job postings on its website suggest it also embraces hybrid work. “In this hybrid role, you'll have a defined work location that includes work from home and assigned office days set by your manager," according to several Verizon marketing job postings.

The Essex Crossing space was originally intended to house its marketing group.

At the time of the lease signing in 2021, Delancey Street Associates, a joint venture including Taconic Partners, L+M Development Partners, BFC Partners, The Prusik Group and Goldman Sachs Urban Investment Group, said Verizon was to become the anchor tenant of the development’s office footprint totaling about 350,000 square feet spanning two buildings that also include 145 Delancey.

The joint venture said at the time as employers seek desirable locations to attract talent and get workers back to the office, Essex Crossing could help employers attract “millennial talent” in a so-called live, work, play neighborhood. The Lower East Side is known for its nightlife, bars and restaurants,

The mega mixed-use development, composed of nine sites totaling nearly 2 million square feet, also includes over 1,000 residences, 300,000 square feet of retail and 100,000 square feet of green space.

The marketing materials advertising Verizon’s sublease space touts in-demand tenant amenities such as a sixth-floor outdoor terrace; a half-acre park; and the famed Essex Market, billed as New York’s most historic public market.

“Commercial space of this scale [in the area] didn’t exist until Essex Crossing,” Ben Baccash, an executive at Taconic Partners, previously told CoStar News. “When people think of a workplace, they don’t think of the four walls of the office anymore. They think what’s nearby ... that can appeal to my talent pool.”