Going Up, Going Down
Vacancy and availability, as I have previously mentioned, are terms that are often used interchangeably. We at NGKF, however, see it as two unique measures based on distinct types of data. The definitions are not complex; they are, indeed, exactly what the names suggest. Vacant space is space not physically occupied. Available space may or may not be occupied, but is at least being marketed. (Slight caveat: NGKF does not include buildings under construction in either figure.)
While vacancy and availability numbers do occasionally move in lockstep, we find it helps to follow both numbers, as they often shift in different directions. Large blocks of space can enter the availability column months or years before the space is actually vacant. For example, a large tenant likely needs a long lead time to make a move–if they end up moving at all. It is not uncommon for a building agent to begin marketing a space as the lease expiration nears to press the occupying tenant for a decision.
In Manhattan, a divergence between vacancy and availability certainly existed in the fourth quarter of 2013. Availability declined by just over 1.9 million square feet while vacancy soared by more than 5.0 million square feet. The districts where this was most pronounced were Avenue of the Americas/Rock Center and World Trade Center. In the former, a block of over 500,000 square feet at 1221 Avenue of the Americas moved into the vacancy column (the former tenant being Societe Generale, with the space being marketed or available for some 26 months). In the latter, two factors contributed to the big jump in vacancy: 4 World Trade Center was added to inventory (this actually added approximately 1 million square feet to both figures), and blocks of space, primarily from Merrill Lynch, were added to vacancy as its lease officially expired at Brookfield Place (after being marketed for the past 31 months).
These examples from just one quarter demonstrate why it’s necessary to look at both figures–vacancy and availability–to really understand what’s going on in this complex market of Manhattan. If you use them correctly, you too can awe your friends and colleagues.