A Theme and A Theory
Gregg Cohen - Corporate Real Estate Specialist
At Cresa, I help companies with their real estate
A Theme and a Theory?
Declining supply and increased demand - stay with me here. Over the last few months, I have seen several companies shedding their offices Downtown for Midtown. To name a few they include: Daiwa Capital Markets relocating to 1251 Avenue of the Americas from 32 Old Slip. CNA Insurance signed a new lease at 1166 Avenue of the Americas relocating from 125 Broad Street. YMCA Retirement Fund will be moving to 1177 Avenue of the Americas from 120 Broadway. ... and the list goes on! While there are a myriad of reasons, I strongly believe that commutation played a role in many of those decisions at least in part. After all, there were 3 years of not working in an office and now not only is there a commute into the city, but then an additional commute downtown? No thanks- say many employees and employers. And then there’s the supply side. In Midtown, Sixth Avenue and Park Avenue are showing 10% vacancy rates (much lower than what many would think reading the press) and we all know about the flight to quality that we have seen. This all means that there’s not as much space around as you’d think - in buildings where you’d want to be. So where can they go? Here’s my theory, Third Avenue. It has some of the highest vacancy rates in Midtown, for now anyway. But here’s the thing- there are several buildings that have been identified for residential conversion, including 845 Third Ave and 750 Third Ave, and that will further reduce supply. This all makes me think that if I was a Third Avenue tenant wanting to stay in my current offices and I had a few years left then right now is a great opportunity to renew early and take advantage of the lower prices before they go the way of the dodo bird. As always, I’d welcome your thoughtsThings I'm Reading?
Remember that promise I made? To read one book a month. As April comes to an?end, I wanted to share the latest book I finished. This month's book: The Old Man and the Sea A quick read with lots of layers to it. The old man, Santiago, was like the miner who every day picks away a little bit of the rock, despite the fact that he can’t see what’s behind the wall. Each day he goes out to fish not knowing if he’ll be successful. This?book spoke to me because I subscribe to the idea that you try to do the best you can each day, but do not get discouraged if the results aren’t always what you want them to be. You can’t control the outcome; you can only execute to the best of your abilities. In this case, it was Santiago who had a dry spell with catching fish, but yet he persevered and went out for almost 3 months every day doing what he knew how to do. He eventually went on to catch the motherlode after persevering despite a ton of doubt from his peers. Despite his best efforts, some things happened out of his control that meant he lost his catch, but he never lost hope. After all, there’s only so much you can control. If you're looking for the book list that I sent out last month, email me. What would you add to the list? ?? Let me know!
Here are some articles I've been reading that I highly recommend:
Tech Workers are Flocking to NYC ?Analysts remain bullish on the future of tech in New York. Is that optimism warranted? Just ask the tech workers flocking to the city. How GenAI Threatens the Use of Office Space in the US ?Generative artificial intelligence could both damage and bolster demand for conventional offices. More NYC landlords tout 'fun' office amenities despite vacancy uptick ?The fun-factor?train keeps on chugging along at the city’s premier office buildings as landlords struggle to arrest an alarming increase in vacancies, which now top 20% overall. Citadel Moving Forward with 350 Park Avenue Office Tower Development ?The 1.8 million-square-foot tower is expected to finish construction by 2032. Where to Find the City's Best Soup Dumplings ?TikTok and Instagram have turned up the heat on the dim sum favorite.
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I agree with your Third Avenue thesis Gregg. And if you follow that theory far enough out it would suggest that downtown will eventually become a pressure relief valve for Midtown