Manhattan added about 20 million sq ft of new office space from 2001 to 2010 but is not expected to add any significantly sized office towers this year, according to a new New York Building Congress report. The exception is a 33,700-sq-ft tower at 2 Allen Street that is expected to be completed late this year. Growth may be ahead, however, with several planned major projects set for mid-decade completion, the trade group says.
Despite the forecast, there is still reason for cautious optimism, says Louis Coletti, president and CEO of the Building Trades Employers' Association. "When you look at these [and other] specific projects, there are still so many factors that are uncertain [such as] tenants, financing, and construction costs, so I'm not as optimistic as the report is," Coletti says. "The second issue for the BTEA is that, even if the projects go forward, there's no guarantee that they will be built with union contractors in all trades."
Several union contracts, including Operating Engineers Locals 14 and 15, are set to expire on June 30. Unions are under fire to cut costs and inefficiencies. The possibility of a strike that could halt work and cost the construction industry billions is looming.
"This is the most contentious time that I can recall in my 25-year career," Coletti says. "There's a lot riding on this."
Meanwhile, NYBC attributes the lag in new office supply to the global economic downturn, which resulted in dramatic declines in office jobs, sharp increases in office vacancies, and a scarcity of construction financing.
While the last decade was an improvement over the 1990s when just 6 million sq ft of space was added, it was still modest by historical standards and partly offset by the 13.5-million sq ft of space lost on September 11, 2001, NYBC says. "New York City has gone two full decades without a significant expansion of its office stock," says NYBC President Richard T. Anderson.
NYBC expects next year to be a bit brighter with project completion anticipated for Extell Development's 700,000-sq-ft International Gem Tower at 44 W. 47th Street. Also, the expected completion of 1 World Trace Center and 4 WTC is set for late 2013.
Developers for a significant number of major office projects have completed designs and secured approvals, and some have begun pre-construction, NYBC says. Boston Properties plans to restart construction of 250 West 55th Street, a 1-million-sq-ft tower that was suspended in 2009 and is now slated for completion in 2014.
Other potential mid-decade projects include Brookfield Properties' 2-million-sq-ft Manhattan West tower; Vornado Realty Trust's 15 Penn Plaza as well as its 1.3-million-sq-ft tower over the Port Authority Bus Terminal; and the initial phases of Related Companies' Hudson Yards development.
NYBC predicts that if those and/or other potential projects are realized, Manhattan's office inventory could grow beyond 20 million sq ft this decade. The group cites favorable key indicators including New York City office employment, which regained 48,000 jobs as of April 2011 and has helped to fuel growth in the office-leasing sector.