The coworking industry was once seen as the scrappy, up-and-coming disruptor of the commercial real estate market, particularly in New York City.
It made sense — companies could rent out fully-furnished, often state-of-the-art office spaces on a short-term basis.
However, despite demand for this flexible way of leasing having grown, the death of long-term leases was far from over. Manhattan tenants and landlords continued to express preferring longer deals simply for the security.
But that all changed when the COVID-19 pandemic hit, and the resiliency of long-term leases is now being put to the test.
“The 10-year lease had already been endangered because of the advent of WeWork and Knotel,” said David Levy, a principal at brokerage Adams & Company. “However, smart companies — wise companies, companies that are more long-term thinking — are reaching for 10-year deals now. And most of the leases we’re making today are 10-year leases.”
Among companies large and small, research has found the average length of leases of at least 100,000 square feet signed in 2020 through September in Midtown Manhattan was 8.7 years, as opposed to the average of 12.7 years last year.
This drop in average lease length was largely driven by major tenants, such as NBC Universal, opting for short-term renewals, according to Franklin Wallach, senior managing director of research at Colliers.
“People go for shorter-term leases when there’s lack of clarity in the market to kind of triage their own immediate situation,” said Grant Greenspan, a principal at landlord and manager Kaufman Organization. “There’s always a flight to quality because prices will drop.”
