The Election and its Effect on Commercial Real Estate Pricing
Jotham Sederstrom Nov. 1, 2012, 11:15 a.m.
With the election next week, we thought it was a great time to (very briefly) look at a 20-year time span (which will soon include a total of six presidential elections) in the context of the Manhattan commercial real estate market. Where did the market stand at the time of each election, and what occurred under the stewardship of each president? Real estate cause and effect appears, for the most part, much more local, and doesn’t have a close relationship with the person or party in the highest office. Nevertheless, elections are great reference points.
After the jump, each of our last five elections is listed, showing the overall vacancy rate and asking rent in Manhattan, ending with where we stand today, exactly one week before the next election.
1992 – Clinton: 17.2%/$27.32
It took some time for Manhattan to shift into major recovery mode—pulling out of a combined recession and building boom (the previous four years had seen 15.5 million square feet of new office construction, with another 1.3 million square feet in 1992—much of it “spec”). That said, the vacancy rate began trending lower throughout the first Clinton term, though there was no spark regarding rents.
1996 – Clinton: 13.8%/$27.08
The second Clinton term was a hot period for New York City and especially the Manhattan real estate market, with financial services competing with tech firms for office space (this first tech boom would go bust in 2001). Vacancy rates plummeted to some of the lowest levels on record, at just above 4 percent, while the average asking rent almost doubled to $50, both by mid-2000.
2000 – Bush: 5.0%/$47.47
2001 was an annus horribilis for New York City, with 9/11 and a recession. During this first Bush term, the vacancy rate climbed to 13 percent and the asking rent fell to $36.59 (in early to mid-2003) before improving slightly by the next election.
2004 – Bush: 11.6%/$39.11
During the second Bush term, the vacancy rate improved to 6.7 percent and asking rents popped to $67.06 (from the second half of 2007 into the first half of 2008) in an overheated market propelled by financial services. However, these heady days would not last, as a severe recession would cause the vacancy rate to head back to double-digits and rents to fall as the country headed into the election.
2008 – Obama: 9.7%/$64.52
During the last four years, the vacancy rate shot to 13.5 percent (the highest since late 1996) while asking rents dropped to $47.23 (late 2009 into 2010 was the roughest patch). The statistics have since improved greatly (thanks to TAMI, but not so much to financial services), yet we have flattened out over the past few months leading into the election.
2012 – ?: 10.3%/$56.52 (end of September)
No matter who wins, there is a lot to deal with going forward that will affect the local market—including, but not limited to, the ever-closer fiscal cliff and (more directly) the variety of financial regulations yet to be fully implemented. It will doubtless be another interesting four years. Good luck to the winner!
Data for each period is from the end of October, except for 2012, which is from the end of September (asking rents are not adjusted for inflation).
Robert Sammons, Cassidy Turley