The Increasingly Scrambled Eggs of the Office-Leasing Market
Jim Hanas April 6, 2011, 5:37 p.m.
At Cushman & Wakefield’s quarterly breakfast yesterday, the news, like the eggs, was bright and bland.
“What do you write about when there’s no bad news?” the brokerage’s chief operating officer, Joe Harbert, asked the reporters assembled in the back room at Michael’s. Responding to his own query: “The question is whether you can sustain 2.5 million square feet a month or is it leveling off?”
Over the last year and a half, the commercial leasing market has been charting a steady rise from the bottom. The vacancy rate fell quarterly half a point to 10 percent, leasing activity hit 7.6 million square feet, and the city absorbed 439,000 square feet of space, all according to Cushman & Wakefield’s first-quarter report for 2011.
The Observer also spoke with Peter Kozel, of Colliers International, which just released a similarly buoyant report, showing a jump in average asking rents to $50.18 a foot, from $48.62 at the end of 2010. Landlords raised rent expectations despite the fact the availability rate remained flat, which could prompt some to eschew prime Times Square and Grand Central submarkets in favor of more affordable digs. “Are tenants going to cast a wider net in terms of looking at space in other parts of the city,” Mr. Kozel wondered aloud, “where rents have not gone up nearly as much?”
Mr. Kozel helped us further scramble the picture by discussing whether some of the leasing activity could be driven by pent-up demand from companies who waited to move until after the economy began to improve. “Maybe we’ve had not just pent-up demand, but anticipatory demand,” he said. “We might see leasing activity fall off a little bit.”
New York City has still only recovered half of the jobs lost during the recession. “We had a good bump up,” Mr. Kozel said, “but the bump-up in employment is probably not enough to justify absorbing 7 million square feet.”
Godspeed, President Obama.