trends
New York City Office Market
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trends New York City Office Market |
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New York, NY -- (November 15, 2001) -- Economic conditions
have played a large role in Manhattan's rapidly softening office market.
It can be speculated that had the WTC attack occurred in early 2000 (a
time of economic prosperity), the loss of so much supply would have
brought the market to its lowest vacancy level since the 1960s. However,
as the attack occurred during a sluggish economy, affected companies were
able to rethink their space requirements, relocate and fill in other City
and regional locations, and in aggregate re-occupy far less space than
prior to the attack. The market is left with a gaping loss of occupancy
that will likely not be regained until a turnaround of economic conditions
spawns office requirement expansions by major corporate users.
In two months, the Downtown Manhattan Class "A" office market has lost the gains it made during the last two years. At the end of October, it exhibited a vacancy rate of 8.5%, a level not seen since the third quarter of 1999. |
In addition, despite landlord's desire not to retrench on asking rental rates, average Class "A" asking rents downtown dropped from $49.41 to $43.45 per square foot, a level not seen since 1Q 2000. Regarding the redevelopment of the WTC, the announcement made by the NYSE to pull the plug on its planned downtown tower hurts the redevelopment effort in spirit by further stigmatizing lower Manhattan. However, the indefinite delay of that project may prove beneficial as it removes a major competitive development from the Downtown construction pipeline.
The near term outlook is negative for the Manhattan office market, in particular Downtown. It appears that at least 8 major financial services firms intend to offer for sublease large blocks of Class "A" space downtown, amounting to approximately 3.2 million square feet. This will put a heavy downward pressure on rental rates, likely more significant than was caused by the "dot com" sublease space surge that hit the market at the start of this year. These conditions might hinder new midtown office development groundbreakings in the short term as well.
For a detailed chart of New York City sub-market rents, vacancies and absorption click here.
For more information contact Justin G. Stein, Regional Director of Client Services Grubb & Ellis New York, 55 East 59th Street New York, NY 10022 Phone: 212.759.9700 Fax: 212.326.4802 justin.stein@grubb-ellis.com