Though office buildings throughout the country have been vacant since the start of the pandemic, in New York City, the problem is even more extreme. Manhattan, a corporate hub for many companies, is grappling with a record-high 18.7% availability rate for offices. And that means landlords are growing increasingly desperate to get leases signed.
That's where broker parties come in. And they could be just the thing to get leasing activity to really take off.
Luring tenants with lavish events
During the pandemic, partying in most forms was off the table before vaccines became widely available. The same held true for bringing workers back to the office.
But now, things are different. Vaccines are easily accessible, and in New York, inoculation rates are relatively strong. As such, many companies are, in fact, gearing up to call staff back to work. Some have already done so or have set hard return dates. And at this point, companies may be in better positions to not only estimate their office space needs more accurately but also commit to lease terms.
It's not surprising, then, to see that broker parties are making a comeback at a time when leasing activity may be reaching a turning point. To be clear, broker parties aren't low-key events during which prospective clients mingle, enjoy some light fare, and perhaps walk out with a branded pocket sanitizer as a parting gift.
No, the broker parties that are happening today are luxury, blown-out affairs designed to show off the city's priciest office spaces -- and convince tenants with deep pockets to take up residence there. These parties can easily cost $50,000 to $100,000 apiece and afford brokers the opportunity to really highlight the unique features the buildings they're promoting bring to the table -- something that can't be done as easily via a virtual tour.
The investor takeaway
The fact that brokers are throwing thousands upon thousands of dollars into these parties could signify that New York City office buildings may be inching toward a recovery. After all, brokers wouldn't be sinking so many resources into these events if they didn't think they would lead to a string of financial transactions.
This is something real estate investors should be happy about. A number of office REITs (real estate investment trusts) with heavy concentrations of New York City properties have seen their revenue decline during the pandemic, and the fear is that the longer workers stay out of offices, the longer those REITs will remain sluggish.
While it's true that many companies are adopting hybrid models that allow employees to split their time between the office and home (or another location), plenty of companies are insisting on a full-time return to in-person work. And some of those companies may be in the market for new, high-end space -- not just because they can afford it but also to incentivize workers to come back in. And what better way to do that than to offer amenities like an on-site gym or sprawling roof deck?
It's only fitting, then, that those potential tenants be wined and dined before putting that paperwork through. And while there's a lot of work that no doubt goes into broker parties, it's fair to say that there's plenty of fun to be had for everyone by both guests and the party planners.