I predicted a year or so ago that there was going to be a shortage of office space in NYC coming, and it is looking like I am going to be proven right.  More and more articles are showing the fear has turned to greed in the office markets.  Investors are looking at buying and the space available is shrinking.  See the GlobeSt article, Manhattan Office Thrives with 24.4% Leasing Volume Increase, which is one of many:

The market isn’t quite tight yet but it is just starting to get tighter and once there is a perceived shortage it almost becomes analogous to a short squeeze in the stock markets.  Consider what is happening now:

  • The top tier part of the market is strong and getting stronger.
  • The government is doing what it can to stimulate and expand business activity in general.
  • The repurposing of older obsolete buildings is in full swing now, which will diminish the supply.
  • The parties that had office space and held off are realizing they better get moving.  Notably, as I have stated before, there are many organizations that have to be in mid-town that cannot afford top tier rents.  They didn’t disappear and although they may have creatively shrunk their need for space, you can only shrink so much.
  • More and more businesses are saying “enough” to working from home and telling workers to come back to work.
  • If you work at a place where most people are back at work you have realized it is career suicide to not come back as well, so you are probably doing that even if not required yet.
  • Landlords are not feeling quite as desperate.
  • NYC’s various headwinds are turning to tailwinds.

I have made my thoughts on the so called “demise” of office well known in many of my previous articles, and I do believe that I am about to be proved strongly correct about office.  Some of my previous articles include:

Remote Work Will End With a Thud – Offices Will Thrive Again

A Very Different Way To Think About Office

Rumors of the Demise of Office Are Greatly Exaggerated

Office Apocalypse - Really?

But before I take a victory lap for predictive accuracy – I don’t want to be one of “those people” who crows about victory all the time – even when he doesn’t deserve it.  I think I am about to be proved strongly correct about office; however, my timing is sufficiently off that I deserve more like a B (or a B+ with grade inflation) than an A.  I do give myself (a lot of) extra credit for having the temerity to go against the grain by saying things like The Rumors of the Death of Office Have Been Greatly Exaggerated and Office is not a Four Letter Word, but overall, if one’s prediction is right and your timing is too much off you should only get partial credit.

To conclude, I think that NYC office is a solid place to be seeking investments where one might be Overpaid For Risk.  

Bruce Stachenfeld aka The Real Estate Philosopher®