The realest estate update

A message from Ben Blumenthal

As talk of a looming (or current) recession grows louder, many have aptly wondered about the impact that an economic decline would have on the office market.
Given our experience representing small-medium sized businesses, here are 4 points I believe are worth highlighting:

1. Volatility supports transactions.
When the market shoots up, tenants seek more affordable alternatives. When the market drops down, tenants seek a “better deal”. While businesses that opted for a fully-remote working environment have already made that transition, the businesses still maintaining a physical presence continue to occupy space and sign leases.

2. Pick the right battles.
Face rents are usually the last line item to drop when Landlords position themselves competitively. The best battle fronts for tenants?
Concessions, work allowances, free rent, and set-up costs - ie. anything that landlords can offer to protect their taking rent numbers.

3. Beware of the "Media's Market".
The market doom and gloom depicted by the media doesn’t always translate to the market that you see as a tenant. Instead, “the market” for you as a tenant consists of your next best available alternatives. Simply put: the market = your options.

4. WFH for Manhattan businesses.
The executives we speak with, most of whom are talking to us because they are occupying space in Midtown, not only stress the importance of in-person attendance at the office but also bemoan the challenge of bringing employees back to the office.
Against the backdrop of a recession (where layoffs and unemployment numbers are expected to rise), it's very likely that the labor market coming back into balance minimizes the employee leverage. In turn, we expect that in the coming months, the most competitive and compelling offers will be from the companies requiring a physical presence.

Wishing you all happy 4th and nice start to summer!

Until next month,

Ben

Ben Blumenthal

Principal Broker

Noah & Co.

For the first time since the start of the pandemic, office occupancy in the city surpassed 40% and is expected to rise further as companies continue looking for amenity-friendly buildings and spaces.

Some of the more noteworthy deals of late:

• PCCP locked in a 10-year deal for 10k SF at 505 Fifth Ave.
• The McKissack Group will open its new HQ at 498 Seventh Ave.
• Law firm Romer Debbas doubled its footprint in a move to 275 Madison
• Merchant Bancorp and several others will be moving to 10 Grand Central
• Handler RE will welcome a trio of new tenants to 561 Seventh Avenue
• Shawmut Design and Construction inked 27k SF at 488 Madison
• Private equity firm NexPhase Capital signed a 10-year lease at 600 Lex

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