2009 NYC Commercial Real Estate Market Update

Tenant’s Viewpoint

Opportunity knocks at the door of commercial tenants!  This real estate market will continue to soften for the remainder of 2009 and into 2010.  This, however, does not mean that tenants cannot achieve opportunistic terms today.  The wait-and-see mentality created by the economic shocks has begun to subside as opportunistic tenants create market leverage by planning ahead and becoming more knowledgable.  Many landlord’s are responding to the slower velocity of leasing by considering all offers and negotiating all terms.   In fact, in today’s leasing market everything is negotiable!  Tenant-friendly terms such as lease takeovers, termination options, lower loss factors and greater flexibility are more prevalent today.

Market Overview

The Manhattan office market continues to decline, while the statistics are still catching up to the true state of the market.  While vacancy rates remain below 10% in all submarkets, availability (which includes occupied space available for sublease) is now greater than 13% in Midtown and 10% in Downtown.  Asking rents have declined at an accelerating pace since Q1 2008 and the spread between asking and taking rents has increased as concessions (free rent and improvement allowances) have increased dramatically.  Unemployment continues to rise with many economists predicting 300,000 job losses from peak employment levels, 40% of this loss in the financial services sector.

Trends & Statistics

Midtown
Midtown Class A vacancy rates increased from 6.4% to 7.4% in the last quarter.  Asking rents for Class A space dropped by 7.5% to $72.32 per rentable square feet (”rsf”) on average.  Midtown Class B vacancy increased to 5.4%, with a third consecutive quarterly reduction in asking rents resulting in an average rate of $46.83 per rsf.  There was negative net absorption in Class A space, while Class B space had a small amount of positive absorption.

Midtown South
Vacancy rates in both Class A and B space rose significantly from 3.9% to 6.6% while asking rents fell from an average of $54.03 to $51.73 per rsf.  Net absorption was slightly negative at (38,212) rsf.

Downtown
Class A vacancy increased slightly from 5.8% to 6.1% with a corresponding decrease in asking rents from $53.41 to $48.11 per rsf.  Net absorption was negative.  Class B property saw a jump in vacancy rates from 8.8% to 9.4% with asking rents falling dramatically from $47.03 to $40.75 per rsf.  Downtown Class B space also experienced negative absorption.

This entry was posted on May 8, 2009 at 5:43 pm and is filed under Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.