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Northeast | New York
Jul 15, 2009
By: Tonie Auer, Contributing Correspondent
Manhattan leasing activity increased in June and the monthly vacancy rate held steady for the first time since February 2008, which together with some otherindicators and more may show some steadying of commercial real estate, particularly in the office market, according to a midyear report released by Cushman & Wakefield.
The report for the Manhattan commercial real estate market showed that the rate at which office space was put back onto the market slowed during the second quarter of 2009.
Total available space in Manhattan reached 41.2 million square feet, the highest level in four-and-a-half years. However, during the second quarter of 2009, 3.7 million square feet of space was added back to the market, about two million square feet less than the 5.7 million square feet added back to the market during the first quarter of 2009.
“The story is the remarkable performance of the New York economy in the midst of one of the worst financial crises since the Great Depression,” Ken McCarthy, managing director of Cushman & Wakefield’s New York area research, told Commercial Property News. “New York lost few jobs with only three percent of total employment. That is the most significant finding and it has been very surprising and very noteworthy.”
Another key conclusion, he said, is that although there is still bad news, the worst of the bad news has been faced.
“There is light at the end of the tunnel. We are still in the tunnel, but it is getting brighter even with difficult times still ahead,” McCarthy said.
Overall leasing activity remained low, totaling 6.3 million square feet at midyear 2009. While monthly leasing activity was slow during the first two months of the quarter, June leasing activity, which totaled 1.7 million square feet, surpassed April and May combined, at 738,000 square feet and 805,000 square feet, respectively, the report stated.
June was the most active month of the quarter for all three submarkets of Midtown, Midtown South and Downtown. Midtown, in particular, buoyed June 2009 activity, with 1.4 million square feet of leasing activity, up 40.0 percent from the one million square feet leased in Midtown during June 2008.
With leasing activity levels up in June and less space being added to the market, increases in vacancy also began to slow. Manhattan’s overall vacancy rate at midyear 2009, which includes space available within the next six months, held steady from the previous month at 10.5 percent, the first time there was no month-over-month increase since February 2008. The overall vacancy rate increased 0.9 percentage points during the second quarter, compared to a 1.6 percentage point increase during the first quarter. Manhattan’s overall availability rate, which includes space available within the next 12 months, increased to 11.5 percent at midyear 2009, up from 10.5 percent at the end of the first quarter of 2009.
The average asking rent for Manhattan office space declined to $60.23 per square foot at midyear 2009, down 7.4 percent from $65.01 per square foot at the end of the first quarter 2009, and down 15.9 percent from $71.59 per square foot at midyear 2008. Average asking rents in Midtown, Manhattan’s largest and most expensive office submarket, were down 20.4 percent from $83.96 per square foot at midyear 2008 to $66.82 per square foot at midyear 2009. Net effective rents, which include the addition of tenant improvement allowances and other concessions, slid even further during the second quarter, the report stated.
As average asking rents for office space in Manhattan continued to fall, the spread between asking rents for direct space and sublease space increased dramatically from the previous year. In Midtown Manhattan, there was a $12.12 per-square-foot difference between direct and sublease asking rents at midyear 2009, more than four times the $2.67 per-square-foot difference at midyear 2008.
Property sales closed and under contract for transactions priced $10 million and higher totaled $2.5 billion at midyear 2009, compared to $13.8 billion at this time last year, according to the report. Approximately $1.7 billion in sales closed during the first half of 2009, compared to $7.2 billion during the first half of 2008.
Though no large new sales were completed during the second quarter of 2009, two major properties were put under contract for sale. Both 70 Pine Street, under contract for approximately $110 million- as CPN reported - and Worldwide Plaza, under contract for approximately $605 million, are expected to close during the third quarter.
Pricing for major properties that have either closed or gone to contract year-to-date represent more than a 60 percent decline from peak 2007 prices. Despite limited activity, there are investors that want to participate in the property sales market, either now or in the near term, a Cushman & Wakefield spokesman said.
Additionally, limited leasing activity resulted in little material change in Manhattan’s retail real estate market during the second quarter of 2009.
By: Tonie Auer, Contributing Correspondent
Manhattan leasing activity increased in June and the monthly vacancy rate held steady for the first time since February 2008, which together with some otherindicators and more may show some steadying of commercial real estate, particularly in the office market, according to a midyear report released by Cushman & Wakefield.
The report for the Manhattan commercial real estate market showed that the rate at which office space was put back onto the market slowed during the second quarter of 2009.
Total available space in Manhattan reached 41.2 million square feet, the highest level in four-and-a-half years. However, during the second quarter of 2009, 3.7 million square feet of space was added back to the market, about two million square feet less than the 5.7 million square feet added back to the market during the first quarter of 2009.
“The story is the remarkable performance of the New York economy in the midst of one of the worst financial crises since the Great Depression,” Ken McCarthy, managing director of Cushman & Wakefield’s New York area research, told Commercial Property News. “New York lost few jobs with only three percent of total employment. That is the most significant finding and it has been very surprising and very noteworthy.”
Another key conclusion, he said, is that although there is still bad news, the worst of the bad news has been faced.
“There is light at the end of the tunnel. We are still in the tunnel, but it is getting brighter even with difficult times still ahead,” McCarthy said.
Overall leasing activity remained low, totaling 6.3 million square feet at midyear 2009. While monthly leasing activity was slow during the first two months of the quarter, June leasing activity, which totaled 1.7 million square feet, surpassed April and May combined, at 738,000 square feet and 805,000 square feet, respectively, the report stated.
June was the most active month of the quarter for all three submarkets of Midtown, Midtown South and Downtown. Midtown, in particular, buoyed June 2009 activity, with 1.4 million square feet of leasing activity, up 40.0 percent from the one million square feet leased in Midtown during June 2008.
With leasing activity levels up in June and less space being added to the market, increases in vacancy also began to slow. Manhattan’s overall vacancy rate at midyear 2009, which includes space available within the next six months, held steady from the previous month at 10.5 percent, the first time there was no month-over-month increase since February 2008. The overall vacancy rate increased 0.9 percentage points during the second quarter, compared to a 1.6 percentage point increase during the first quarter. Manhattan’s overall availability rate, which includes space available within the next 12 months, increased to 11.5 percent at midyear 2009, up from 10.5 percent at the end of the first quarter of 2009.
The average asking rent for Manhattan office space declined to $60.23 per square foot at midyear 2009, down 7.4 percent from $65.01 per square foot at the end of the first quarter 2009, and down 15.9 percent from $71.59 per square foot at midyear 2008. Average asking rents in Midtown, Manhattan’s largest and most expensive office submarket, were down 20.4 percent from $83.96 per square foot at midyear 2008 to $66.82 per square foot at midyear 2009. Net effective rents, which include the addition of tenant improvement allowances and other concessions, slid even further during the second quarter, the report stated.
As average asking rents for office space in Manhattan continued to fall, the spread between asking rents for direct space and sublease space increased dramatically from the previous year. In Midtown Manhattan, there was a $12.12 per-square-foot difference between direct and sublease asking rents at midyear 2009, more than four times the $2.67 per-square-foot difference at midyear 2008.
Property sales closed and under contract for transactions priced $10 million and higher totaled $2.5 billion at midyear 2009, compared to $13.8 billion at this time last year, according to the report. Approximately $1.7 billion in sales closed during the first half of 2009, compared to $7.2 billion during the first half of 2008.
Though no large new sales were completed during the second quarter of 2009, two major properties were put under contract for sale. Both 70 Pine Street, under contract for approximately $110 million- as CPN reported - and Worldwide Plaza, under contract for approximately $605 million, are expected to close during the third quarter.
Pricing for major properties that have either closed or gone to contract year-to-date represent more than a 60 percent decline from peak 2007 prices. Despite limited activity, there are investors that want to participate in the property sales market, either now or in the near term, a Cushman & Wakefield spokesman said.
Additionally, limited leasing activity resulted in little material change in Manhattan’s retail real estate market during the second quarter of 2009.
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