News
Better in Eleven?
January 5, 2011
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| Happy New Year-end reports! The Q4 impressions are beginning to trickle in: It's good news for office space, with vacancies falling from 12.3% in November to 12% in December, reports Cassidy Turley. And sublet space is doing even better. Overall sublet availability, particularly in Midtown, has fallen at a much sharper rate than direct availability since recessionary highs (direct peaked at 45.6M SF in March ’10, while sublet peaked at 17.3M SF in May ’09), VP of research Robert Sammons tells us. From November to December, sublet space fell from 11.7M SF to 10.9M SF. And this wasn’t one or two large blocks of space taken off the market, he points out—these are subtenants in the 30k-60k SF range, like Sterne Agee’s 46k SF sublet from JPMorgan at 277 Park. And if this trend continues, it could lead to steeper asking rent increases this year as landlords become more confident as competition from sublet space wanes. |
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| Meanwhile, JLL director of research Jim Delmonte reports that office vacancy rates fell in all property classes in Midtown and Midtown South during ’10. Lower Manhattan, however, saw a slight increase. “The Manhattan office market finished 2010 as expected,” he says, but there are mixed signals in submarkets and property types, with Downtown lagging behind Midtown and asking rents for smaller, trophy-quality space rising. Activity is driven by relocations andrenewals, rather than new demand, which he notes could ultimately lead to flattening absorption. In Midtown, several new leases signed involved less square footage than prior locations. And the space may eventually come to market—and if this comes back in the first half of the year and there isn’t sufficient demand, absorption could fall back into negative territory and wipe away ‘10’s gains. |
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| Outside of our Manhattan bubble, there are signs that conditions worldwide have stabilized and beginning to pick up, according to NAI Global, which says to expect improvement, albeit modest, in just about every market sector and geography this year. CEO Jeff Finn says that companies everywhere are taking advantage of this market by extending or renegotiating leases, securing investment properties, disposing of underperforming assets, and finalizing plans for growth over the next two years. “We expect a much more active market for buyers, sellers, and occupiers as conditions continue to improve,” he posits. |
