NYC Office Space Rental: A Cost Analysis
As one of the world’s leading business locations, New York City attracts office-based businesses with a wide range of requirements and budgets. In this article, we offer an in-depth analysis of the costs associated with renting office space in the Big Apple, so you can make the best decision when establishing your business footprint in the city.
Contents
Understanding the factors that influence office space costs
The cost of leasing office space in New York City‘s office market is influenced by a number of factors, including:
– Location: Although Manhattan still tops the list in terms of prestige, other areas fare better for ease of commute, as is the case of Brooklyn, and their popularity is reflected in rising prices when compared to the rest of the New York office space stock.
– Building class: The generalized devaluation of office properties other than best-in-class assets has mostly affected the costs of Class B space. On the other hand, Grade B and C offices may come at a significantly lower base rent, but they may incur more miscellaneous expenses, which aren’t included in quoted base rent prices.
– Lease duration: The flexibility of short-term leases comes with higher monthly costs, whereas long leases often come with concessions, like rent abatements than can reach 12 months for 10-year leases in the best Manhattan offices.
– Office amenities and specs, especially those that contribute to a higher work-life balance or related to well-being.
– Current demand trends and vacancy levels. Since 2020, demand has concentrated on trophy space, creating record-high vacancy levels in other asset types, which if not corrected, could eventually lead to a drop in rental rates.
Office space in NYC: A cost overview
According to 2023 data, average asking rates for all Manhattan office space classes were just under $75 per square foot. Within Manhattan, there are significant differences across locations, going from $68 / sq ft in Columbus Circle to $104 / sq ft in Greenwich Village.
Costs by NYC building class are as follows:
Manhattan Class A $80 / sq ft
Manhattan Class B $68 / sq ft
Manhattan Class C $51 / sq ft
Other NYC locations:
Downtown Brooklyn Class A $60 / sq ft
Downtown Brooklyn All Classes Average $58 / sq ft
Financial District Class A $58 / sq ft
Financial District Class B $48 / sq ft
Hudson Yards Class A $141 / sq ft
Hudson Yards Class B $68 / sq ft
Madison / 5th Avenue Class A $111 / sq ft
Madison / 5th Avenue All Classes Average $103 / sq ft
Midtown Class A $82 / sq ft
Midtown Class B $60 / sq ft
Cost comparison highest and lowest base rents in NYC:
| Hudson Yards $139 | Penn Plaza $66 |
| Plaza North $113 | Tribeca $65 |
| Plaza South $112 | World Trade Center $62 |
| Greenwich Village $98 | Financial District $56 |
| Soho $89 | City Hall $48 |
Additional costs to consider in traditional leases
When budgeting for a conventional office lease in New York City, it’s important to have a clear picture of all the costs involved. Operating expenses are by far the biggest additional cost. According to the Building Managers and Owners Association, operating expense costs in NYC are the highest in the country, with averages of $28 / sq ft.
It’s worth noting that not all lease types have the same operating expenses inclusions. Some of the following OpEx items may or may not be included, and they need to be budgeted for:
– Common area maintenance charges.
– Property taxes, including the BID tax, which is billed to owners but often passed to tenants, and which is progressively being rolled out to outer NYC boroughs. In addition, Manhattan office properties with an annual base rent above $250,000 are liable for commercial rent tax, at 3.9% of base rent.
– Rent escalations, which start 12 months after the lease start date.
– Different types of insurance cover.
Other expenses
– The cost build-outs for office branding or customization purposes.
– Furniture and wiring if not included.
– Security deposit, with upfront payments between 5 to 18 months’ rent, depending on how financially established the tenant is.
– Waste disposal: if not included under operating expenses, a private carter needs to be hired. Prices for this service depend on the amount of waste produced, either in weight or volume. Maximum rates are determined by the BIC, but there are no minimum fees.
– In long-term leases, penalties may apply for early termination.
– Move-in and move-out expenses, including not only the moving contractor fee, but also costs involved with getting furniture or equipment into the building’s freight elevator, which is usually charged by the hour.
Cost of renting flexible office space in NYC
Flexible office space costs follow a different pricing model based on membership fees. There are large variations in prices, going from all-inclusive to pay-per-use options. Although location matters, costs are mostly determined by amenities and perks.
Membership fees
The median rate comes in at just under $240 / desk / month. Utilities, taxes, operating expenses, and insurance are included in membership fees, although some tenants may need to take out more extensive or specialized insurance than the one provided by the coworking operator.
Security deposits are lower than in conventional leases, usually a couple of months’ rent.
Additional services & amenities
When you decide to rent office space in NYC, this is where costs really begin to add up. It does depend on the membership package and operator, however. Lower-end memberships may only include a limited number of hours per month, and prices escalate if unlimited access is needed.
Services like printing, copying, access to meeting rooms and conferencing facilities, lockers, storage, and admin support are often charged on a per-use basis.
In addition, desk type also influences cost: hot desks can cost less than $300 / month, although some premier spaces charge nearly double that amount. Dedicated desk space averages $500 / month, and private offices can go from $800 to $3,600 / month in luxury workspaces.
Conclusion
Renting New York City office space requires considering more than basic square footage prices. There are many factors influencing office lease costs, from location and lease duration to current market trends. The comparative cost analysis we’ve provided in this article can help businesses aiming to secure the most cost-effective and strategically advantageous office space in New York City.
Further Insights
Want to learn more about trends in office spaces and the commercial real estate market in the US? Check out more of our recent stories, below.
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