Impact of Law Firm Leasing Activity In MIdtown Manhattan
Midtown Manhattan is one of the most desirable neighborhoods in the world, and it is no surprise that it also has a strong commercial real estate market. In Q4 of 2022, total new leases and renewals finished up 15% annually. The Q4 sublease availability rate rose from Q3 and the average asking rent was up 6% from one year ago. It is notable that lease renewal activity increased significantly in Q4. Renewals for 2022 overall accounted for 22% of all leasing activity (which is close to the 25% historical norm). The primary driver of leasing activity in Midtown during this time was “flight-to-quality” in buildings that were new construction or fully renovated.
Midtown showed strong demand compared to other neighborhoods because it has better quality assets. Both the professional services and legal sectors each provided about 10% of the total activity. The average asking rental in Midtown for direct space from landlords was about $83 per sq. ft. The average asking rental in Midtown for sublease space was almost $63 per sq. ft. The shared legal office market suffers the same conditions as the larger commercial real estate market and the work from home concept seems to be particularly entrenched for legal professionals.
Accordingly we are seeing significant space size reductions on rollover leasing by law firms. The legal office footprint has again been reduced by external circumstances. The first great reduction was caused by advances in technology eliminating books and paper used by the industry. The present reduction was caused when many attorneys realized that they could work from anywhere, and that their profession was not location dependent.
Lawyers are hunting for bargains in Manhattan’s shared professional office space sector and while they are being found in B and C buildings, the better offices in nicer buildings still maintain a premium in a market flowing with rumors of unbelievable deals and inventory overflow. Somehow there is a disconnect between perception and reality – it’s slow out there but not quite as slow as conventionally thought.
The legal office footprint has always been a significant factor in Midtown Manhattan’s commercial real estate market. In the past few years, the amount of space leased by law firms has decreased significantly due to advances in technology and the work from home concept being more accepted by legal professionals. This has led to a decrease in the demand for shared professional office space and has led to lower asking rents.
The impact of law firm leasing activity on Midtown Manhattan has been substantial. Law firms have been reducing their space requirements due to advances in technology and the work from home concept being more accepted. This has led to a decrease in the demand for shared professional office space and has led to lower asking rents. Despite this, Midtown Manhattan remains a desirable neighborhood and has seen strong leasing activity due to the quality of its assets and its “flight-to-quality” in buildings that are new construction or fully renovated.
Larger firms in the Grand Central office spacer market are still not keen on renting individual offices to attorneys who are not affiliated with their firm. Usually this is for reasons of client confidentiality. Accordingly the larger firms are renting blocks of furnished space, rather than individual offices.
Here is an interesting example of a law firm sublease at 101 Park Avenue, proximate to Grand Central Station. This is a 12,000 sq. ft. fully furnished and outfitted tower floor space (38th fl) in move in condition for a law firm. It has 20 windowed offices, 5 of which are partner size. There are also 4 interior offices and everything else a small firm could need: https://lookingforspace.com/ny/new-york/10017/101-park-avenue/1547/
It offers a very efficient footprint with lots of glass and light, great views and above standard furnishings. This is the type of prospective deal that will allow below market rates with some recovery for the sublessor and an admirable rent for the subtenant.
We provide office space solutions for small law firms. Whether you need 2 offices, or 12,000 sq. ft. you can find what you need at LookingForSpace.com