NEW YORK CITY — What's in store for the city's office space in 2016?
Brooklyn office space will take off as will wellness in the workplace and companies sharing office space, Airbnb-style.
All signs point to a busy year for office space as the city’s economy hums along and job growth is expected to continue.
“Office employment will slow, but it’s still positive and growing,” said Heidi Learner, Savills Studley chief economist.
Here are predictions on what will shape New York City’s commercial real estate market in 2016.
1. Companies will “play musical chairs.”
With a lot of new space on the market in Hudson Yards or the Financial District, like One World Trade Center and Brookfield Place, expect many companies to leave behind “older generation space” for newer and pricier — but perhaps smaller — offices, Learner said.
“There are going to be a lot of tenants deciding whether or not to stay in their current locations for the next two years,” she said.
2. Co-working spaces will still be popular, but only big brands will survive.
Co-working spaces like WeWork, the Yard and others gobbled up space in 2015. They offered the promise of a desk and a way to be social with their beer kegs, rooftop yoga and events on everything from mindfulness to food labeling tips.
“Co-working spaces will continue their bullish acquisition strategy,” said Phil Palmer, executive managing director at JLL. “However, only the larger brands. Smaller brands will either be acquired or slow down their acquisition pace.”
3. Office-sharing, in the spirit of Airbnb, will rise.
Sharing office space is gaining ground for small companies looking for something less social than co-working, said Dave Mandell, founder of PivotDesk, which acts as a matchmaker for companies that have extra space to rent out.
Hosts have ranged from AOL and Makerbot to Tough Mudder.
More brokers are starting the platform, Mandell said, as are major landlords looking to provide more “flexibility" to tenants.
“For brokers and landlords, the clients they’re dealing with today can’t predict how big they’ll be in a couple of years,” Mandell said.
4. Landlords feel pressure to renovate.
Landlords of older buildings are going to have a hard time retaining and attracting tenants unless they undertake full scale renovations, Learner said.
“Offices are trying to reinvent themselves to compete more and enable their firms to come in and compete with the likes of Google,” Learner said. “They’re offering more amenities, whether it's rooftop lounges or more flexible spaces for offices or conference rooms.”
5. Offices pay more attention to health and wellness.
Some firms are converting conference rooms into yoga or meditation spaces and adding “mother’s rooms” where new moms can pump in comfort, said architect Scott Spector, of the Spector Group.
“The wellness thing is here to stay, not as a recruitment tool but as a retainment tool,” he said.
Standing desks, which many experts believe are healthier, have become especially popular at finance firms.
Spector's firm is also building more “full blown” fitness centers for companies, like one it recently did for Uber on the West Side with spin stations.
6. Music rooms and “speakeasies” in the office.
When figuring out how to "program" a new hedge fund office, Spector learned about a head honcho's love of music. So, the firm built a special, acoustically-designed space as a music room. For another hedge fund client, he created a multi-functional “speakeasy/bar space” where the owners, principals and others can play music.
“They invite associates to come and jam,” Spector said.
7. Work-from-home trend recedes
The work-from-home trend is reversing as employers are demanding workers show up to the office more often.
“Our clients are telling us that when all their employees do show up, there’s not enough space,” Palmer said. “Too few elevators to move them and too few bathrooms to accommodate them.”
8. Brooklyn. Brooklyn. Brooklyn.
The Brooklyn office market has been much talked about the past few years in terms of investment.
“Brooklyn has moved from a back-office market to a preferred market, especially among the Millennials,” Palmer said.
Interesting projects include the Brooklyn Navy Yard's Building 77 (a former ammunition depot converted into a 1 million-square-foot hub for manufacturing and technology innovation) and Midtown Equities’ Empire Stores redevelopment at 55 Water St. along the DUMBO waterfront (which will have 380,000 square feet of office space, 80,000 square feet of retail and restaurant space and 7,000 square feet of rooftop space).
9. City focuses on creative solutions for manufacturing sites.
While there aren’t formal zoning proposals on the table as with affordable housing, there are “internal” city discussions on figuring out ways to enlarge different manufacturing sites to bolster this economic sector, said Chris Havens, a commercial broker with CitiHabitats.
Part of the talks involve figuring out ways to allow manufacturing sites to build larger by adding community facilities, like youth centers, he said.
“The city needs more industrial space,” Havens said.
“There is a bit of a resurgence of small-scale manufacturing going on in New York City,” added Gita Nandan, an architect with thread collective, whose firm has a few grants looking at small-scale manufacturing and live/work culture.
“Affordable housing is important, but affordable studio space is also important,” she said, noting that community groups are focusing on how to keep these spaces affordable, too.
10. All eyes will be on Downtown Brooklyn’s new major office tower.
JEMB Realty’s 35-story tower rising at 420 Albee Sq. in Downtown Brooklyn will offer 400,000 square feet of office and retail space. It will be one of the tallest buildings in the borough and is the area’s first new class-A office tower in more than three decades.
The building will focus on “boutique” firms that have graduated from co-working or incubator spaces, but instead of looking for massive 50,000-square foot spaces are looking for 6,000-12,000 square feet, said JEMB’s Morris Jerome
“[Firms] need to be in Brooklyn where their employees are,” said Jerome, explaining that the developer was in the process of designing a rental tower when they realized that there were 16,000 apartments nearby about to come on line but that there was very little office space in the area.
11. Williamsburg grows up and upscale.
Williamsburg continues to transform, as a glass-encased 400,000-square foot office building called the Brooklyn Generator is angling to rise this year on an entire square block on Kent Avenue and North 12th Street. It would target incubators and startups along with larger spaces for more mature companies, the developer has said.
About a block away, a 183-room hotel called the William Vale is expected to open in April, which will include a park (with a “street food truck concept"), a 50-foot pool, ground floor restaurant and 360-degree rooftop bar and ballroom, said Sébastien Maingourd, general manager of the 22-story glassy tower.
“It will be a game changer not only in Williamsburg, but in New York City,” he said of the “resort-inspired property” with $400-a-night rooms where “you will be able to spend the entire day.”
12. Long Island City also on the rise.
Long Island City also is expected to attract more office tenants, like Macy’s, which recently decided to leave its photography studio in Downtown Brooklyn for 150,000 square feet in LIC.
“Close to Brooklyn, we are seeing more interest in Long Island City as Manhattan rents move higher and Jersey City tightens,” Palmer said.
