market research

February 2012

February 2012 New York Commercial Real Estate Market Report

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Office building Developers were overly optimistic that they were going to sign millions of square feet of leases with New York corporations looking to consolidate. With the economy in flux, it is yet to happen.

The city’s low office vacancy rates and slowly rising rents are overshadowing a disturbing office leasing trend. Ground-up office projects have been unable to secure major tenants, which in turn have stifled development. News that Silverstein Properties might cap off 3 World Trade Center at seven stories because of its inability to land a tenant, is just the most recent example. Three World Trade Center is close to being topped off — 73 stories shorter than initially planned. Crain’s reported that if developer Larry Silverstein, president of Silverstein Properties, cannot find an office tenant for the planned 80-story tower by the end of the year, he’ll cap it off at seven stories and seek retail tenants to fill the structure. After talks with UBS broke off Silverstein has not come close to finding a tenant, Silverstein will resume construction as planned on 3 WTC with slight delays to the expected 2015 completion date



There are a limited number of tenants who will pay more than $100/RSF in today’s economic environment. While certain high-profile leases in 2011 might have made it seem as though office leasing had recovered fully. For instance, Kohlberg Kravis Roberts & Company signed a 64,000-square-foot lease at $147 per square foot for space at 9 West 57th. But in the third and fourth quarters office leasing numbers faltered. The message that the $100 deals are back is true, to a point "There are more deals than in 2010 or 2009, but it is still a 40 percent drop from the peak."

New York Market Overview

  • Total Manhattan Class A Office vacancies stayed at 8.5 % vacant
  • Total New York City Office vacancy stayed at 7.3 % vacant
Manhattan office leasing activity hit its highest level since 2000, with tenants signing new deals for more than 30 million square feet. The velocity of office leasing slowed in the third quarter though it improved in the fourth quarter

The city’s low office vacancy rates and slowly rising rents are overshadowing a disturbing office leasing trend. Ground-up office projects have been unable to secure major tenants, which in turn have stifled development. News that Silverstein Properties might cap off 3 World Trade Center at seven stories because of its inability to land a tenant, is just the most recent example. Three World Trade Center is close to being topped off — 73 stories shorter than initially planned. Crain’s reported that if developer Larry Silverstein, president of Silverstein Properties, cannot find an office tenant for the planned 80-story tower by the end of the year, he’ll cap it off at seven stories and seek retail tenants to fill the structure. After talks with UBS broke off Silverstein has not come close to finding a tenant, Silverstein will resume construction as planned on 3 WTC with slight delays to the expected 2015 completion date

There are a limited number of tenants who will pay more than $100/RSF in today’s economic environment. While certain high-profile leases in 2011 might have made it seem as though office leasing had recovered fully. For instance, Kohlberg Kravis Roberts & Company signed a 64,000-square-foot lease at $147 per square foot for space at 9 West 57th. But in the third and fourth quarters office leasing numbers faltered. The message that the $100 deals are back is true, to a point “There are more deals than in 2010 or 2009, but it is still a 40 percent drop from the peak.”

The volume of New York City multi-family building sales increased 33 percent in 2011 compared to 2010, with institutional investor interest bolstering the 43 percent year-over-year increase in dollar volume. In 2011, there were 436 multi-family transactions consisting of 589 buildings totaling $4.23 billion, compared with 2010, which had 392 multi-family transactions with 442 buildings totaling $2.949 billion.

The Manhattan office market saw 62,117 square feet of positive absorption with gains in Midtown being offset by conditions in Downtown. The vacancy rate held steady at 7.8 percent from November, the report says, while the average asking rent for space rose to $50.37 per square foot from $49.10 per square foot in November

Manhattan investment sales last year declined as the year wore on as sellers decided not to place properties on the market, even as the total amount sold far outpaced 2010. There were $21.7 billion in investment property trades in 2011, up 87 percent from the $12 billion in 2010. But investment sales in the fourth quarter were just $5 billion, down from the $6.1 billion in the third quarter and $8 billion in the second quarter

Rents are falling even further on Second Avenue on the Upper East Side as the ongoing construction for the Second Avenue Subway has made residing there less desirable and doing business there substantially more difficult,. Businesses between 62nd and 96th streets on Second Avenue report decreased sales and some have closed. The remaining businesses had their rent lowered by 40 percent to account for plummeting sales due to construction and blocked frontage signs on the blighted avenue.
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