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Manhattan’s Office Activity Ticks Higher

Average Visits in June Reach 77% of Pre-Pandemic Level, Trade Group Says
Manhattan's average office visit rate rose to 77% of the pre-pandemic level in June, according to a new study. (Andria Cheng/CoStar)
Manhattan's average office visit rate rose to 77% of the pre-pandemic level in June, according to a new study. (Andria Cheng/CoStar)
CoStar News
August 6, 2024 | 9:59 P.M.

The monthly average office visit rate in Manhattan has moved higher, led by activity at top-tier buildings across the borough and especially in midtown, according to a new study.

Manhattan office buildings saw the average visit rate rise to 77% of the pre-pandemic level in June from 74% in May and 72% a year earlier, according to a study released Tuesday by the trade group Real Estate Board of New York, adding that the percentage was the highest since REBNY began tracking it in February 2023.

The study, based on Placer.ai location data in 350 Manhattan office buildings in June, also found office visit rates increased from a year earlier across different office classes and different Manhattan markets.

Still, the gains aside, the performance was mixed. The flight-to-quality trend of top-tier office buildings luring more employees to the office was evident. The highest-quality, Class A-plus properties saw the average building visitations reach 91% in June, up from 83% during the same month last year. In contrast, lower-class buildings saw the average visitation rate climb at a smaller rate to 75% from 70% a year earlier, the REBNY study found.

By neighborhoods, the visitation rate mirrors the performance in the leasing activity with midtown outperforming Midtown South and downtown market.

The average office visit rate in midtown in June rose to 81% of the pre-pandemic level from 76%, in contrast to the 78% rate in Midtown South and 69% downtown. REBNY’s study defines Midtown South as the market south of 33rd Street and north of Canal Street.

Class Separation

“Office building visitation has inched its closest yet to pre-COVID norms. This is a welcome result not only for office properties but the thousands of retail businesses and the transit system that depend on daytime commuters,” REBNY’s Vice President of Research Keith DeCoster said in a statement. “Best-in-class properties and midtown continued to separate from the rest of the market in June. Some B and C buildings, particularly those with prime access to transit, also registered improved visitation.”

Manhattan’s not the only market seeing an increase in the return-to-office rate. Nationwide, with more employers implementing return-to-office mandates, visits to U.S. office buildings in July rose to 72.2% of the pre-pandemic level in July 2019, a new post-pandemic high and beating June’s record of 70.6%, according to a separate study by Placer.ai and released also on Tuesday.

New York and Miami both led other U.S. cities with their respective return-to-office rate both rising to about 90% of July 2019 levels, Placer.ai said.

A Placer.ai spokesperson didn’t immediately respond to a CoStar News request seeking comment on the size of the New York sample and how that compares against REBNY’s sample size. Its national study tracks 1,000 office buildings in the country.

Higher Rents

“Working at the kitchen table wasn’t an existential threat” to the office market, Vornado Realty Trust Chief Executive Steven Roth said on a conference call Tuesday, a day after the company reported it leased 1.32 million square feet of office space in New York last quarter at an initial rent of $131.37 per square foot and a weighted average lease term of 9.7 years. In a sign of the market improving, Vornado was able to charge higher rent on previously leased spaces. “Our business is on plan [with improved] momentum. … Good space is being eaten up and rents are rising.”

Vornado’s Penn 2 redevelopment atop the Penn Station transit hub is “extremely active,” Roth said, adding more than two-thirds of Vornado’s office vacancies have been “spoken for.”

Vornado also has reached a “handshake deal” with a user for a long-term master lease of the entire 1.1 million-square-office property at 770 Broadway in Manhattan, he said, adding Vornado will retain the 92,000-square-foot Wegmans retail property.

Separately, it’s selling to Japanese apparel giant Uniqlo the portion of its store at 666 Fifth Ave. that’s owned by a retail joint venture where Vornado Realty Trust has a majority stake.

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