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Weekly Market Report - February 20, 2023


Trends to Watch in 2023:

Properties that combine cutting edge amenities with optimal work experience should succeed in returning staff to the office. The desire to be more visible during a recession could also motivate staff to return. Many firms have adopted hybrid working, and more will follow. The dominant model could be three days a week in the office and two days of remote work. Businesses are demanding greater flexibility from owners, impacting both lease terms and the layout and use of office space. This will have knock-on effects on building valuations and tax rolls. Expect a significant number of firms to reduce their office footprint as leases roll.

A reduction 20% to 30% is typical for larger occupiers, but some cuts are 50% or more. Performance and demand differentials are expected to widen between building classes plus between and within markets and different business sectors. The U.S. vacancy rate is rising and is expected to reach, or exceed, the prior cyclical peak over the year ahead. Increased building obsolescence will result in greater structural vacancy. Net absorption turned negative in Q4 2022, erasing the gains seen earlier in the year. A significant uptick looks unlikely in the face of business and economic uncertainty. As the tech sector retrenches, leasing activity will decline unless another tenant sector takes the lead.

Sublease space has reached a record high and is expected to rise as more firms cut space and put the surplus on the market. Development is already down 40% from this cycle’s peak, and will continue to fall, due to a downturn in pre-leasing and fundamentals that do not support speculative projects. Asking rents are holding up, but with generous concessions. The prevalence of lower-cost, high-end sublease options will place further pressure on direct rates.


SL Green has brought on Mayor Eric Adams' former chief of staff to help the company’s quest for a casino license for its proposed gaming facility in Times Square.Frank Carone, who left his job in city government last month to set up his own consulting firm, has signed a deal with Greenberg Traurig, the law firm working with SL Green on the project. Carone, who is temporarily prohibited from lobbying city government, told Politico in a statement he will “help create a diversified community engagement hiring plan as part of the proposal for a Times Square gaming destination.” SL Green has joined with Caesars Entertainment and Jay-Z’s Roc Nation talent agency to pitch the Times Square building that currently houses The Lion King musical as a future gaming destination.

There are three licenses downstate casino now on offer, with the New York Gaming Facility Board opening its request for applications for the licenses last month. Bids require a minimum of a $500M capital investment and $500M license fee, and the process is expected to be extremely competitive, with those vying for the licenses required to show how their offering benefits the local economy, maximizes tourism, factors in live entertainment as well as mitigates impact on housing and small businesses. SL Green faces stiff competition from other major real estate firms that want the licenses. Related has joined with Wynn Resorts with a proposal to build a casino on the undeveloped western half of Hudson Yards, while Thor Equities, Saratoga Casino Holdings, the Chickasaw Nation and Legends intend to apply for a license for a facility at Coney Island.

Vornado, RXR Realty, the Soloviev Group and Saks Fifth Avenue have all reportedly expressed an interest in entering the bidding process. SL Green would need the support of Gov. Kathy Hochul, borough presidents and city and state lawmakers with appointments to advisory committees, as well as the mayor, to win a license. The casino bid would be a shot in the arm for the REIT, which is the largest owner of New York City offices. It posted a $93M net loss in 2022 and is in the process of selling off some of its holdings to bolster its cash reserves.


11,000 at Meta, nee Facebook. 10,000 at Microsoft. 18,000 at Amazon. Those are the number of layoffs globally, all either in late 2022 or early 2023, at technology giants as compiled by, a tracking website. All in all, 352 tech companies cut 104,132 jobs through mid-February — just in 2023. And, in all of 2022, there were 160,097 jobs lost at 1,045 companies, according to the website. It stands to reason that a good percentage were in and around New York City, the East Coast hub for the likes of Alphabet and Meta, among others. ( doesn’t break down layoffs by city.) Of course, if you were one of the 265,000 or so people who lost their jobs, the biggest impact would be on yourself. But commercial real estate in New York could also feel the ill effects, and acutely so. The so-called TAMI industries — tech, advertising, media, and information — have been the backbone of the office leasing market since perhaps the Global Financial Crisis in 2008 and 2009, and definitely since the onset of the pandemic until just recently. In fact, for a while there, as improbable as it seemed, it looked like TAMI would overtake FIRE — finance, insurance and real estate — as the primary driver of Manhattan office leasing, a truly seismic shift culturally and financially. So, the job cutbacks in this fiercely growing sector — which by itself was largely responsible for creating demand for posh, modern office space in the Midtown South submarket that includes the Flatiron and Meatpacking districts plus SoHo, NoHo and Chelsea — are an even more fearsome prospect.

There’s another factor that mitigates any potential fallout from tech’s troubles: Financial services is regaining its appetite for office space, according to the numbers. Financial services and insurance have taken a greater percentage of the leases signed. For the full year of 2019, their combined share was 23.2 percent. For 2020 and 2021, it was 29.8 percent. And, for last year, it was 40.8 percent. At the same time, TAMI went from a 36 percent share of leasing activity to 24.7 percent to 17.5 percent, respectively. Financial services and insurance companies leased 4.3 million square feet in Manhattan in the third quarter of 2022, a post-pandemic peak, before falling off to 1.6 million in the fourth quarter, normally a slower quarter anyway. What’s still not clear is just how much office space will be considered appropriate. Brokers, public officials and even owners have spoken about converting some of these less attractive, less saleable offices into housing, but the cost and logistics of conversion could prove difficult.As much as 40 percent of New York’s office stock could be transformed into “wonderful housing” to make the city work for the decades to come.


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