Commercial real estate brokerage firm Studley believes the growing uncertainty surrounding the American economy and the upcoming presidential election have contributed to a flaccid rental market, and will continue to shrink some tenants appetite for new office space, the firm said in its quarterly report today.
The result is that the NYC office market “is likely to remain in a bit of a holding pattern over the next several quarters,’ according to the Studley Office Market and Spacedata (sic) Report.
Those on the hunt for smaller or mid-size space, ranging from 20,000 square feet to 50,000 square feet, will have an abundance of options to choose from, while those sniffing around for spaces larger than 100,000 square feet won’t be as fortunate, Studley predicts.
“Tenants looking for Class A blocks of 20,000 sf to 50,000 sf in Midtown could pick from 167 blocks in the first quarter of 2012, nearly even with the 170 blocks available a year ago,” the report says.
Those looking for 100,000-plus square feet spaces had only 32 blocks to choose from on the market.
Leasing activity as a whole was “anemic”, falling by more than 30 percent from 8.5 million square feet in the fourth quarter 2011 to 5.8 million square feet.
Other highlights include:
- Availability rates declined: Midtown’s Class A rate dropped by 0.4 percentage points to 11 percent. Downtown’s Class A rate dropped 0.7 percentage points to 9.9 percent.
- Overall asking rents remained flat: NYC’s overall asking rents increased ever so slightly to $50.06 (an increase by +0.1 percent). Midtown’s Class A rents increased by 1.4 percent to $71.63. Downtown’s Class A rents fell 1.3 percent to $46.66.
- Quarterly leasing fell: Overall deal volume dropped by 31.4 percent.
The report concludes:
“Today’s holding pattern might actually not look so bad by late 2013, both for the U.S. economy and New York City’s office market. The economy faces a potential “fiscal cliff” after the election – as much as $1 to $2 trillion in spending cuts are likely and they could be combined with tax hikes or reform of the tax code. In New York City, by this time next year the market will start to feel the impact of several million square feet of existing space being shed by larger firms, and a few quarters later new construction will loom. If demand stays on its more recent course and remains subpar, availability will spike. As the recent employment numbers show, though, the city has the capacity to exceed expectations.”