September-October 2023 Newsletter

- Daniel Kahnema

While the general office market narrative today tends to skew negatively, there is a noticeable pocket of resilience in the Midtown office market among small to mid-size businesses.  

According to a recent study by the NYC Economic Development Corporation, close to 95% of all workers in Manhattan work for an organization that is 50 people or less. While this study solidifies Manhattan’s identity as a small business town despite the big fish tenants, it also reinforces that the greatest demand base for Midtown’s office space is small to midsized organizations.

Let's use the analogy of a pyramid:

At the base of this pyramid is a large volume of smaller tenants actively making office space decisions to grow, renew, relocate, sublease, etc. with few impediments beyond what their executives want to accomplish
No board approvals, stakeholders, employee resistance, or PR campaigns.

While providing these small spaces may be less ideal for Landlords (divided floors, more expensive, shorter lease terms, non-credit tenants, etc.), it’s a classic down market play to keep space leased which also commands a premium. And it works! The resilience of the pyramid base is what supports the upper tranches or remains in place for when they return. 

Moving up the pyramid is where you’ll see enterprise level organizations which are fewer in number but larger in size. While the decisions at this level in the pyramid influence sentiment and drive the narrative, their decisions are but a small number of the office space decisions being made in the city. 

So while the headlines may be dominated by the few top of pyramid organizations (and tell a negative story), it's the base of the pyramid where you'll see the small and midsize organizations that are the true supporters of Midtown’s enduring allure & relevance.

Until next month,
Ben