Vacancy rates rose in the New York office segment in Q3 – the 13th consecutive quarter in which they haven't dropped, according to new data from Moody's Analytics.
This time, they moved in accelerated fashion, up 10 basis points (bps) in the latest quarter, and by 100 bps over the last four quarters to 11.1%.
Vacancy remained flat for three of the 13 quarters: Q2 2020, Q3 2021, and Q1 2022. The most recent vacancy decline occurred in Q2 2019.
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New York last experienced vacancy levels of 11.1% near the end of 2010 after coming down from its peak of 11.7% at the beginning of that year, according to Ricardo Rosas, Moody's Analytics' associate data scientist.
He tells GlobeSt.com that while both asking and effective rents have grown for two consecutive quarters, the metro's rising vacancy rate is playing into rents, remaining below their Q1 2010 levels of $75.53 for asking and $62.73 for effective.
"New York's vacancy rate is more pronounced among Class B and C properties than Class A, rising by 50 bps for B and C in Q3 and by 140 bps over the last four quarters to 12.2%, making it the highest vacancy rate for Class B and C properties since 1996," Rosas said.
Meanwhile, the vacancy rate for Class A properties declined by 10 bps in Q3 and rose by 80 bps over the last four quarters to 10.4%, according to Moody's Analytics.
South Broadway Area Hit Hardest
The greatest increase in vacancy occurred within the South Broadway submarket during Q3, rising by 110 bps to 9.8%.
Midtown South came in second, increasing by 60 bps to 10.4%.
At the other end, Midtown West recorded the largest vacancy decline of 50 bps to 11.7% followed by Penn Station which declined by 30 bps to 6.6%.
Penn Station Vacancy Falls for Third Time in Four Quarters
The New York office market is trending toward a flight to quality.
At a deeper dive, three submarkets recorded declines in Class A vacancy rates over the last four quarters, the largest being Penn Station (which includes Hudson Yard) which declined by 360 bps to 4.3% followed by Midtown South which declined by 350 bps to 4.2%.
In contrast, Class B and C properties recorded an increase in vacancy rates across all submarkets over the last four quarters, the largest being Downtown which increased by 400 bps to 16% followed by Midtown West which increased by 190 bps to 15.3%."
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