It’s been five years since Lehman Brothers filed for bankruptcy in the middle of the night on September 15th of 2008. More than 26,000 Lehman employees eventually lost their jobs as fear gripped the financial markets.
Many people see this moment in history as the bookmark for the real beginning of the Great Recession though it actually started 10 months earlier in December of 2007. When Lehman announced their bankruptcy, the Dow fell more than 500 points in one day to 10,917 and eventually dropped all the way to 6,547 in March 2009, a 40 percent drop in just six months. The price of crude oil on September 19th was $104.55 yet less than four months later on January 16, 2009 it was priced at just $36.51 as the world economic outlook went from bad to worse. The world financial system seemed to be in free fall.
It got awfully quiet in our business after that day in September. Everything immediately went on hold. Is there anything more difficult for a business owner then to have no idea what will happen next? So much of what we do depends upon our level of confidence and with the financial world in shards, it was easier for business owners and decision-makers to sit on their hands and do nothing. The majority of the leases being signed afterwards were renewals or subleases as millions of square feet went on the sublet market. The landscape changed.
I remember it well. I represented the buyer of a building that closed in December of 2007 at $600 psf. After the offering went out to 1000 people, brokers and investors swarmed the building. After Lehman fell, the owner thought about selling it. We went to a few people with the offering but could only muster $450psf, so we held on. People wanted a deal or no deal at all, not that there was any significant financing to speak of anyway. Another example came in the summer of 2008 we signed a lease with a tenant in one of the MHP buildings at north of $70psf. In November, the tenant went to sublet their space and the market brought $40psf.
Now five years later most people believe that little has changed in the financial world that makes it safer for the rest of the world. Regulations are probably not as strong as they should be but it is a delicate balance between over regulating and strangling businesses and creating too much freedom which creates a “wild west” type of scenario. Were it not for the very aggressive work by the Fed throughout this entire period, we might be in a much more difficult place. We continue to see signs of a very modest recovery and here in New York, the confidence level is much higher than in most other cities and towns around the country.
From difficulty and duress comes innovation. While the blue chip firms of the past might struggle due to unforeseen circumstances around the world, technology and new media firms are forging ahead and have created a level of confidence and inclusiveness that is contagious. Just look at the Flatiron district. In a recent survey of 2,000sf to 10,000sf from 14th Street to 23rd Street, on a direct basis, there are just 10 spaces available. New York is resilient and we prove it time after time.