The fundamentals underpinning New York City’s office market are the healthiest they’ve been since before the pandemic, and investors across the globe have taken notice.
Bisnow/Ciara Long
JLL’s Peter Riguardi, Nuveen’s Shawn Lese and SL Green’s Harrison Sitomer at Bisnow’s Future of the Market: CEO and Top Executives Summit.
“New York is firing on all cylinders,” Newmark Executive Vice Chairman Adam Doneger said Thursday at Bisnow’s CEO and Top Executives Summit. “As it relates to what we’re seeing in bidder activity and bidder count and people that actually want to control New York real estate, it’s unlike we’ve seen since 2018, which was a high-water mark in our business.”
The city’s office market had its strongest leasing quarter since 2019 to start the year, and it now finally appears on solid long-term footing, executives with SL Green, Nuveen and other major city office owners said onstage at Convene 360 Madison.
Nuveen Chief Investment Officer Shawn Lese said that South Korean, Japanese and Singaporean investors are seeking out NYC office opportunities with a view that a full-time return to office is inevitable.
The consistency of bids for office from both domestic and international investors is indicative of the strength of NYC real estate, Lese said.
“Over the course of the last probably year to right now, we get unsolicited bids from high net worth family offices for everything that we own in New York City,” he said. “We don’t get that elsewhere in the country.”
Investor appetite and tenant demand are strong, and while the White House’s tariff announcement on April 2 turned the stock market into a white-knuckle roller coaster, the leasing pipeline for NYC’s biggest owner of office space is deeper than it was four weeks ago, SL Green Chief Investment Officer Harrison Sitomer said.
“Four years ago, in 2021, capital markets were performing very well, rates were low, prices were high, but fundamentals were still relatively weak,” he said. “Now we sort of have the opposite, which is capital markets are somewhat retrenching, but at the same time, fundamentals are outperforming.”
Office owners inked 12.2M SF of leases with tenants in Q1, and vacancy dropped from 20.1% to 17.7%, according to Savills. SL Green is far from the only owner whose leasing pipeline remains active, JLL Chairman and President for the New York Region Peter Riguardi said.
“The real estate fundamentals in this market, in particular, represent what you see across the U.S. in major cities: a lack of quality office space. A lot of buildings in between that, if they’re capitalized and curated correctly, have a chance to achieve their highest rental achievements they’ve ever had,” he said.
Still, tariffs are impacting the market, changing underwriting and pausing deals, Georgetown Cos. CEO Adam Flatto said.
“There’s several transactions which we put on hold simply because of uncertainty in capital markets,” he said. “Rationality will tell you, within a few months, that’s going to settle down. So we’re not killing things.”
The danger that tariffs pose to NYC’s office market is their potential to spiral out of control and drag the U.S. economy into a recession, Lese said. That could have a knock-on effect for occupancy, leasing and rental growth — all of which have to be factored into financing deals happening now.
“Tariffs don’t just impact materials,” he said. “It’s the whole entire underwriting that you’re doing on a property.”