Commercial Rentals Remain Strong Despite Economic Ennui, Experts Say
By Kiratiana Freelon on January 7, 2013 4:23pm
NEW YORK — It's the commercial rental market that could.
Despite national economic doldrums and natural disaster, Manhattan's commercial rental market has held steady — maintaining a stamina in the fourth quarter of 2012 that bodes well for the new year, experts said.
Flouting the thinning inventory trend present in residential markets, available commercial space in Manhattan has hovered at 11.5 percent in the third and fourth quarters of 2012, according to statistics from Colliers International.
Jones Lang LaSalle posted a 7.7 percent increase in vacant space, but that's because of new developments and not a true market glut, agency executives said.
Together with Jones Lang LaSalle's reported 6 percent increase in price-per-square-foot rates across Manhattan, this suggests an overall stable market, according to agency officials.
"We're seeing a lot of activity, but we're not seeing a lot of growth," said Peter Riguardi, president of Jones Lang LaSalle New York's tri-state operations.
Colliers' stats were in keeping with that trend.
The firm found the average $56.17 price per square foot wasn't a huge difference from several months earlier, making for what Colliers called an "average" leasing year.
And much like the housing market — which saw a Hurricane Sandy-spurred increase in residential demand — the storm might have buoyed the commercial rental market as well, Colliers said.
That's because some 10 million square feet of office space was taken offline Downtown, driving businesses to Midtown and squeezing availability in both areas, according to Colliers.
“The Manhattan office market showed tremendous fortitude in the fourth quarter, particularly in the face of Sandy, the presidential election, the pending fiscal cliff, and marginal economic growth nationally,” Joseph Harbert, president of Colliers International’s Eastern Region, said in a statement.
“There are positive signs pointing to longer-term health, with a technology sector that has established likely permanence, a robust Midtown South, and tremendous new development projects both Downtown and on the West Side delivering best-in-class product. But the financial sector is reconfiguring, the effects of Sandy are still being sorted out, and Midtown North has soft pockets that need to be resolved.”
Riguardi agreed that Midtown South was one of the next big things in commercial rentals.
"South of 34th Street from Park Avenue [west], it's definitely doing extremely well," he said. "That's where all these young businesses and a lot of the younger workforce wants to be."
The weak links in the market?
Lessors are asking for less money per square foot in prime locations — such as Columbus Circle and the Plaza District, experts said.
And Downtown, described as a "depressed" leasing market, lags largely because some big-ticket buildings were taken offline in the wake of Sandy, the agency said.
Colliers projects, however, that the World Trade Center development will bolster the area, as these buildings — "some of the most modern and efficient buildings in Manhattan" — will attract leasers.
Riguardi said that the WTC project will drastically help revive Downtown's lagging rentals.
"We're very optimistic about the paradigm change that will occur there when all the construction is completed," he said. "That's definitely going to be a hot area."