Outlook: New York

A pre-holiday research report by Cushman & Wakefield on the New York economy says that office rent prices won't spike in the near future.

The report provides a broad-based look at U.S. economic indicators, and focuses on New York business trends. It applies the national views to the local real estate market in finding that while occupancy will rise, there will be two countervailing pressures:  more efficiency in use of space, and "for the first time in 20 years," an increase in office inventory.

Midtown South is the most competitive NYC rental market, according to C&W, with a 7.6% 2013 third quarter vacancy rate.  That compares with a national average of 13.4%, and, in the next tightest market, San Francisco, at an 8.7% vacancy rate.

Midtown was 11.4% vacant in the third quarter, up from 10.5% a year earlier and 9.6% at the end of 2011.

The report cites flat employment in financial services but soaring demand in the technology/advertising/media/information services that dominate Midtown South. Soaring demand in Midtown South has helped Downtown vacancy and rents, but not Midtown.

While the report projects improving financial services employment and concurrent increase in demand, it also notes that coming increased office availability in, for example, the World Trade Center, as the reason that rent prices will not increase significantly.

"By the end of the first quarter of 2014," the report notes, "there will be roughly 6.6 [million square feet] more space in Manhattan than there was a year earlier, the largest 12-month increase since 1990."

But job creation isn't keeping pace to fill those vacancies fast enough, the report suggests, forecasting slow demand, particularly in Midtown. "[T]he Manhattan office market is expected to experience a modest decline in vacancy and steady rent growth. The focal point for the rent growth will be Midtown South with Midtown and Downtown growing, but much more slowly."

So the bottom line is that the trends remain the same, but slower. 

The executive summary for Cushman & Wakefield's National Economic Outlook & Regional Office Market Update--U.S. & New York is available at a link on this page.


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