Rental prices plummet and available office space skyrocket as banks and businesses vacate millions of square feet.
New York City, NY, March 20, 2009 - Office and retail 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 research shows the New York office market may not improve until the end of 2012.
Asking rent reductions continue and are now down 30% from the peak last summer cycled and expected to fall an additional 20% with selected fire sales are occurring. 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 this year have picked up from the near standstill in the fourth quarter of 2008.
“Prices are going down and will continue to do so until they reach the post-9/11 50% lows,” said Stephen Sunderland, managing director at Optimal Spaces, a New York tenant representative brokerage firm. “The next real estate meltdown will move from residential to commercial, it has already started.”
Real estate corrections in sales rental bankruptcies are starting to occur in commercial real estate where more than $1 trillion dollars of write-downs will occur in the next two to three years as cap rates rise, rents fall, and vacancy increases.
The market is not entirely pessimistic. With banks clearing out space, companies looking to expand have more options. The Durst Organization has moved into two floors at the Bank of America Tower at One Bryant Park occupying 55,000 square feet.
For the latest market research on New York City commercial real estate, contact Stephen Sunderland at Optimal Spaces or visit www.opticalspaces.com. Optimal Spaces releases a monthly analysis of the market including detailed statistics and graphs.
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About Optimal Spaces
Optimal Spaces is an industry leader Tenant Representative in office, retail and industrial real estate in the New York Metro market. We represent our client interest, unlike other New York City brokerage firms whose legal duty is to represent landlords. Optimal Spaces provides real estate solutions through consulting, analysis and brokerage services. Optimal Spaces brokers are all experts each with a minimum of ten years in the fields of retail, office, industrial building sales and acquisition. More information about Optimal Spaces can be found by accessing its website www.optimalspaces.com.
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