market research

March 2009

March 2009 New York Commercial Real Estate Market Report

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Office rents are off 30% from their all time highs and will continue to fall as Securities firms and banks may give up to 8 million square feet of office space in Manhattan this year. JPMorgan Chase, Citigroup and Lehman Brothers have already vacated 6.4 million feet of city office space, and Merrill Lynch is likely to give up another 5 million square feet and Smith Barney millions more feet. The available office space may reach 15.5% by the end of 2009, and the New York office market may not improve until the end of 2012.

New York Market Overview

  • Total Manhattan Class A Office vacancies increased from 7.2 % vacant to 7.3 % vacant
  • Total New York City Office vacancy increased from 6.9 % vacant to 7.0 % vacant
Weak leasing in Manhattan's submarkets continues to trigger comparisons with velocity rates not seen since the early 2000's. The Penn Station Midtown district in January, had only one 10,000 square feet rental, and only 15,000 square feet was leased in the Plaza District.

The vacancy rate for Manhattan Class A properties rose in January to 10.2 percent, cracking through the 10 percent ceiling for the first time since November 2004, The overall vacancy rate in the borough was 11.3 percent, up from 10.4 percent the month before, and average asking rents dropped by $1.03 to $59.30. In Midtown, the Class A vacancy rate jumped sharply to 11.3 percent in January from 9.9 percent in December; in Midtown South the vacancy rate rose a smaller amount to 11.9 percent from 11.4 percent; and Downtown, the average Class A asking rent fell 8.5 percent between December and January to $56.53. Asking rent reductions continue and are now down up to 30% from the peak last summer The number of blocks of space in Midtown with dramatic price cuts quadrupled between September and December. Prices have fallen back to levels last seen in 2005. Each office job loss equates to a loss in demand for about 200-250 square feet. Despite this bad news, leasing negotiations have picked up from the near standstill in the fourth quarter of 2008.
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