Will Amazon’s New Headquarters Kill Your NYC Business?

Extract from The RPG Office Condominium Report, Second Half 2018

Will Amazon’s New Headquarters Kill Your NYC Business?

The 2018 Manhattan office leasing market experienced a record year with 33 million square feet of leasing activity. Corporate behemoths such as Google, JPMorgan Chase, Pfizer, Disney and Facebook have committed to millions of square feet of office space in Manhattan. Amazon’s November announcement that Long Island City would be its second headquarters location added even more fuel to the already heated office market.

Brooklyn and Long Island City have long been considered a cost-efficient alternative to Manhattan’s premium pricing. Now, with the five million square feet Amazon is expected to occupy, the boroughs may no longer be a low-cost option. With a decreased supply of office space, lease rates will inevitably increase, resulting in a ripple effect on all boroughs.

A recent report by JLL shows that in 2018, a record high of 129 leases were signed with a starting rent of $100 per square foot or more. These $100 per square foot leases occurred in 55 buildings, totaling 46 million square feet.

This prolonged strength of the Manhattan office leasing market is making it difficult for businesses to survive. As availability rates of quality office space shrink, rents are reaching towering prices and forcing out smaller businesses while large corporate tenants are expanding.

The Manhattan office market is expected to continue to fluctuate; however, if the general trend of corporate expansion continues, then we will likely see $100+ per square rents will likely become the norm rather than the outlier.

How can businesses protect themselves from getting priced out? The answer is to purchase an office condominium.

An office condominium offers businesses and organizations the opportunity to purchase their office space rather than rent. The annual cost of ownership is significantly less than leasing over a five- to ten-year period. By purchasing their space, unit owners are also protected from being displaced with ever-rising rents. Companies and organizations can then reap the long-term benefits of ownership, including control over space improvements, static expenses, and capital appreciation as values continue to rise.