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Wall Street Bull
A new Marcus & Millichap report warns that looming Wall Street employment cuts and potential impact from the Dodd-Frank Act may slow recovery for the rest of the year. But the bull says, "Don't have a cow... yet." Strong gains in the professional services, biz services, and financial sectors reduced unemployment to 8.6%, the firm says. And demand for large, market-rate apartments surged to levels last seen over a decade ago (with the Upper East Side, West Village, Downtown, and Brooklyn Heights leading). While tenant demand may waiver, the Rent Regulation Board raised the max increase on rent-stabilized apartments to 3.75% for one-year leases and 7.25% for two-year lease—and as these rates take effect this quarter, some tenants priced out of Manhattan will migrate to more affordable housing in Brooklyn and Queens, driving vacancy down to pre-recession levels.
Marcus & Millichap Weather Forecast
CRE Meteorologist: Marcus & Millichap
Although the firm’s forecast sounds cloudy, there are still pockets of sunshine. The second half of the year will see an addition of 65,000 jobs, restoring employment to 80% of its pre-recession peak (‘10 saw 51,000 positions created in the city). Construction will ease this year, with 3,900 units expected to come online (the largest, Beekman Tower, will deliver 900 market-rate units). Employment gains will drive down citywide vacancy to a three-year low of 2.4%, and owners will lift asking rents 6.2% to $2,996/month and effective rents 6.9% to $2,895/month, the largest gains since early ’08.