market research

December 2009

December 2009 New York Commercial Real Estate Market Report

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Over the past 30 days, retail vacancies have increased 18.67 % and office vacancies have increased 1.36%, this should trigger rents to continue to fall and landlord concessions to increase.

New York Market Overview

  • Total Manhattan Class A Office vacancies decreased from 8.4 % vacant to 8.3 % vacant
  • Total New York City Office vacancy stayed at 7.6 % vacant
Just one month after declines in rents in Midtown seemed to be leveling off, the average asking rents in October fell sharply as vacancies rose by their largest amount in nearly a year. The average asking rent in Midtown fell by 99 cents per square foot to $56.89 per square foot, while the vacancy rate rose by .7 points to 10.3 percent. In September, the average asking rent in Midtown declined by just 6 cents per square foot, to $57.88 per foot. However that price support did not continue last month. The price decline in Midtown was the largest since August when it fell $1.46 per square foot. The increase in vacancy is the largest since December 2008, when the rate rose 1 point to 7.6 percent from 6.6 percent a month earlier. The weakness was not as pronounced in Manhattan overall. The average asking rent fell by 88 cents per square foot from September to October, and the vacancy rate rose by .5 points to 9.8 percent. Several indicators showed a weakened industrial real estate sector in the third quarter of 2009. The country's industrial vacancy rate reached 10.3 percent at the end of the third quarter, its highest in 15 years and a 2.2 percent rise over 2008, while industrial space under construction fell to 15.2 million square feet, its lowest quarterly total since 1995. The drought in new construction activity may lessen the pace of soaring vacancy rates. Overall leasing activity in the industrial sector also fell to 169.5 million square feet so far this year, an 18.8 percent decline from this time in 2008.

The vacancy rate for Midtown office buildings hit its highest level in more than 15 years last month, in part by several large blocks of space that were placed on the market. Overall Manhattan was mixed, showing some strength in the Midtown South market where the vacancy rate declined modestly and prices rose for Class A office space. The Midtown vacancy reached 14 percent, its highest level since March 1994 when the rate reached 14.1 percent. Asking rents also fared poorly in the district, falling 1.2 percent to $58.16 per square foot. In a positive sign, the vacancy rate for all classes of buildings in Midtown South fell .1 points to 14.1 percent and the average price for Class A office space rose by $1.36 per square foot to $50.88 per foot. But for all classes of buildings, the average asking rent fell by $0.48 per foot to $39.88 per square foot.

The amount of free rent that landlords are offering to entice reluctant tenants to sign contracts has hit record levels in the current downturn, despite the fact that asking rents have started to stabilize in parts of the Manhattan leasing market. In the third quarter, two Midtown leases were signed with 17 and 18 months of free rent, double the average of eight and a half months. Even longer rent-free periods were being negotiated. Average asking rents are now down 29 percent from the peak of $71.92 per square foot in July 2008.
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