Rebuilding Place in the Urban Space

"The softening job market might still cool demand for office space. But JPMorgan believes something else explains why Manhattan office stocks are performing so poorly in such a strong market: Developers are spending heavily on the fastest elevators and the most amenable amenities. Those investments are increasing overhead and depressing cash flow, meaning shareholders must wait longer to see returns. Faced with that prospect, institutions are putting their money elsewhere."

"Paolone wrote a report Monday describing how this scenario is playing out at Vornado Realty Trust. The developer has invested more than $1 billion transforming two towers overlooking Penn Station. Tenants pay up to 40% more in rent for improved space in the buildings. Verizon Communications just leased 200,000 square feet in the tower called Penn 2. New tenants will receive roughly one year of free rent at the start of their leases, a commo"

An empty subway car during the evening commute shows how Covid and post-Covid work-from-home practices have drastically reduced downtown and transit activity, with daily worker visits falling to 50% or less. Cities promote return-to-office policies to revive downtown commerce and transit ridership. Some firms retain remote work to reduce leased space. Required investments in elevator speed and amenities are raising overhead for office owners, depressing cash flow and stock valuations even when upgraded spaces command higher rents. Major developers have spent over $1 billion renovating towers, attracting higher rents and large leases but often offering substantial initial free-rent periods. A softer job market could further cool demand and analysts estimate large potential global office value losses.

Read at Urbanplacesandspaces