Weathering the Storm: 4th Quarter Leasing Saw Improvements

“In the last 10 business days of the year, we closed almost 20 deals,” said Peter Takiff, chief financial officer at Eastern Consolidated.

Though Mr. Takiff would not discuss specifics, the deals that closed were a combination of contracts teed up that just happened to finalize in December and sales that were likely tax-motivated.

“If you look at our fourth quarter this year versus our other three quarters this year, our fourth quarter was about three and a half times the size—in dollar volume—of our third quarter; it was about double our second quarter and it was almost double our first quarter,” Mr. Takiff said.

As for what the future might hold, the next several quarters may not be as overtly worrisome as the fourth quarter of 2012 was, but other obstacles could have a negative impact on the New York markets.

“When business leaders are focused on an election, focused on the ramifications of a hurricane and floods, focused on what the government’s going to pass for the new tax laws and the fiscal cliff and how that gets resolved, oftentimes these decision-makers punt on making the decisions until there’s a little bit more clarity, and I think a lot of that now is behind us,” said Mr. Glickman.

What is in front of us is a contentious set of budget debt ceiling negotiations in Washington, D.C., said Sam Chandan, president and chief economist of Chandan Economics. Also, changes to tax policy and government spending could have a dampening effect on the market. “The kinds of anxieties that were being motivated by the fiscal cliff toward the end of the year, regrettably, will persist into 2013.”

Following debt ceiling negotiations and beginning-of-year jitters, the commercial markets could become more predictable. “By second quarter, we’ll see sales activity and leasing activity return to their trend rate of improvement. Both of those are modestly positive,” said Mr. Chandan.

Seconding Mr. Chandan’s prediction of an uptick in activity in the second quarter of 2013 is James Delmonte, principal and vice president of research at Avison Young. Mr. Delmonte noted that 2012 saw a number of large and early renewals. “I think that might continue, because inevitably the market’s going to go up, so if people want to lock in current rates, you may see more renewal activity in the first part of the year.”

“In the investment sales space, interest rates are still historically low—buildings are trading for very low cap rates, which means it’s an attractive environment for people to sell,” said Mr. Takiff, giving his prediction for the coming year. “On the other hand, New York City’s economy has been strong and there’s been a lot of activity converting to residential—the market is very tight.”

As for sales, Mr. Fasulo predicts numbers will settle back into the range of $6 billion to $10 billion per quarter. “The problems in 2013 will be more on the supply side than the demand side, which is as strong as ever, in my mind.”

“I’m an optimist at heart,” said Mr. Bernstein, predicting a strong 2013 despite concerns over the debt ceiling and woes within the financial services industry. “By year end, it may surprise some people that we may see 100 basis points come off the supply, and we may see some modest price increases as the market starts to get legs.”

kstrauss@observer.com