While not really a doomsday scenario, it’s certainly close to a worst-case scenario. The potential amount of vacant space by year-end 2013 for the Class A segment of the Manhattan office market could climb from the current 24,478,576 square feet to 33,624,296 square feet.
This would cause the Class A vacancy rate to jump 340 basis points, from 9.9 percent to 13.3 percent—which would be the highest rate since December 1996. A quick aside to tell you how our vacancy rate is calculated: we include anything currently vacant or that will be vacant up to six months from the current date (each firm calculates it a bit differently, meaning you will see varying figures across myriad reports).
If all space that is currently marketed (or expected to be marketed) that has an occupancy date by year-end 2013 is included and net absorption otherwise remains flat (it is 500,000 square feet in the red at mid-year 2012), Manhattan could see a glut in vacant office space (albeit probably temporarily).
Downtown, not surprisingly, will feel the brunt of the impending storm (the World Trade submarket in particular) due to 1 and 4 World Trade Center coming on-line, as well as occupancy dates for a big chunk of space at 2 and 4 World Financial Center. Midtown won’t remain unscathed, with availability potentially spiking along Avenue of the Americas.
Midtown South, with a new building expected to deliver in 2013, could see an increase as well. All of these figures, of course, are predicated on an economy that will continue to limp along through next year. Global and national changes ahead could push this future vacancy figure lower (or higher).
—Robert Sammons, Cassidy Turley