New York Market Overview
- Total Manhattan Class A Office vacancies increased from 8.5 % vacant to 8.7 % vacant
- Total New York City Office vacancy increased from 7.7 % vacant to 7.8 % vacant
New leasing activity in Midtown jumped by 34 percent in December from the prior month, ending the year with an annual volume of the 2008 level yet despite the strong leasing levels, average asking rents continued to fall in all Manhattan markets,. The volume of new leasing in Midtown last month was 1.6 million square feet, up from the prior month's level of 1.19 million square feet, and was ahead of the five-year monthly average of 1.23 million square feet. Average asking rents fell by $0.04 per square foot to $56.02 per foot, while in the Park Avenue submarket, average asking rents fell by $2.49 per foot to $60.93 per foot.
While some are bracing for a double dip in the commercial real estate market, there are others who think prices have already stabilized. Many have fears of an even greater commercial fallout. The debt markets were so bad last year that now they are beginning to unlock, and values are going to stabilize.
Whether encouraged by declining asking rents or spurred by demand for office tenants, the difficult year of 2009 finished with a flurry of activity. Yet few believe the market has found a solid footing, as landlords continue to cut asking rents to compete with high unemployment and an uncertain recovery. The big question is how tenants feel about the future. If a tenant feels confident that their business is going to be better five years from now, then they are more likely to want to lock into the cheap rates of today. However, stronger activity in Midtown did not signal that a recovery was at hand.
An economic recovery may happen in 2011, due to an expected bottoming out of the commercial real estate market by the end of the year. It is highly unlikely that commercial real estate losses could hurt the economy as much as the subprime residential mortgage losses have because the value of outstanding commercial mortgages is much less than the value of outstanding residential mortgages. The industrial sector could start to recover in late 2010 because it is less dependent on job growth than the commercial office and retail sectors.