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Manhattan Office Leasing Vacancy Rate Down to 11.1%. Has The Bottom Been Reached?

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Jan. 12 (Bloomberg) -- Manhattan has 38 percent more office space for rent than a year ago as Wall Street job cuts and a weak economy reduced demand, Cushman & Wakefield Inc. said. The vacancy rate in the fourth quarter was unchanged from the third.

Available space totaled 43.8 million square feet at the end of 2009, compared with 31.8 million a year earlier, the New York-based brokerage said today in a report. That’s equivalent to 11.1 percent of Manhattan’s office space, the same as at the end of September, according to Cushman.

“We’re calling this close to the bottom,” said Joseph Harbert, Cushman’s chief operating officer for the New York region. “Rents will go down a bit from here, vacancies will go up a bit, but you won’t see any dramatic movements on either of those fronts in the next nine months.”

New York has lost about 40,000 financial services jobs in the past two years, according to the city’s Independent Budget Office. Earnings for the top 10 largest U.S. banks recovered in 2009 after the companies lost a total of $27 billion in the fourth quarter of 2008. Analysts estimate they will report a combined $3.84 billion profit for the fourth quarter of 2009.

In the second half of 2009, new leases were signed on 9.9 million square feet of space, compared with 6.4 million in the first half, according to Cushman. There were 10 leases for more than 100,000 square feet in the fourth quarter, twice the number from the same period of 2008.

Vacancy Rate

The office vacancy rate declined for two straight months after rising to 11.4 percent at the end of October, Cushman said. The rate was 8 percent at the end of 2008.

Asking rents in Manhattan averaged $55.52 a square foot at yearend, down 20 percent from December 2008.

Sublease space, or surplus offices marketed by tenants rather than landlords, rose to 10.6 million square feet from 8.2 million square feet at the end of 2008. It was down from a peak of 11.4 million at midyear. High sublease availability tends to depress rents because tenants have less incentive to seek top dollar for the space.

“The wholesale dumping of space is over, and has been over for some period of time,” Harbert said. “At some point we’re going to go back to recognizing we live in a space-constrained city.”

Midtown Rents

Asking rents in Midtown Manhattan fell 22.5 percent to an average of $61.82 a square foot, Cushman said. The vacancy rate was 12 percent, up from 8.5 percent a year ago and little changed from the third quarter.

So-called taking rents among Midtown Manhattan’s Class A buildings, the top-quality space, have fallen 42 percent to $52 a square foot since the first quarter of last year. They climbed from $50 a foot in the third quarter, the first sequential rise in at least two years. The increase may be another sign of the market bottoming, Harbert said.

Asking rents are the rents landlords advertise; taking rents are based on the terms of signed leases. They tend to be lower because they include concessions including contributions to interior construction costs and periods of free rent.

Lower Manhattan rents averaged $40.36 a foot, down 15.7 percent from a year earlier. Vacancy was 9.6 percent, down from 9.9 percent in the third quarter.

The area’s vacancy rate may rise to as high as 14 percent in the next 15 months, in part because of Goldman Sachs Group Inc.’s plan to move its headquarters to a new skyscraper in Battery Park City from 85 Broad St. and other downtown buildings, Harbert said.

In Midtown South, roughly the area between 34th and Canal streets, rents dropped 12.8 percent from a year earlier to $47.17 a foot. Vacancy was 10 percent, up from 7.1 percent a year earlier and 9.4 percent in the third quarter.

To contact the reporter on this story: David M. Levitt in New York at

Manhattan Office Space , New York Office Space , Office Rental , Office Space , Office Vacancy Rate

Investment Sales Expected to Double in 2010

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Sales of office, retail, multifamily and industrial properties asre expected exceed $100 billion in 2010; more than double the $45 billion projected for all of 2009, according to Real Capital Analytics. "We have hit bottom and are starting the new decade on the upswing," the New York research firm said. The projected increase would be the first year-over-year gain since 2007.

Real Capital noted that credit markets have shown signs of thawing, which could help facilitate sales in 2010. It added that capital raising by investors has been stron in 2009, led by REITs, which raised $28.3 billion this year, including $17.2 billion of equity from 59 stock offerings.

Source: Loopnet


Commercial Real Estate , Office Building Sales , Office Space

Silicon Valley, Ca - Vacant Office space equal 15 Empire State Buildings

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A Bloomberg news report says Silicon Valley has the biggest office space glut since the dot-com bust, leaving the U.S. technology hub with empty high-rises and office parks that make it impossible for landlords to sustain average rents.

More than 43 million square feet of office space stood vacant in the third quarter of last year -- that's the equivalent to 15 Empire State buildings and a vacancy rate over 21% for the silicon valley area.

Asking rents averaged $34.56 a square foot for Class A space in the third quarter, 21 percent less than a year earlier. The rate for flex space was $14.16 a square foot, down 16 percent, according to CB Richard Ellis.

Commercial property foreclosures will at least double in 2010 and job growth is not expected to return for two years after that, held back by U.S. consumers who are saving more and changing their spending habits.

Unemployment in the greater San Jose area was 11.8 percent in November.

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Lease Negotiations , Office Rental , Office Space , Office Vacancy Rate , Silicon Valley Office Space

World's Tallest Building Opens Today

Despite the finacial issues facing Dubai, the world's tallest building opened there today. The 160 story Burj Dubai Tower will be renamed Burj Khalifa, after the president of the United Arab Emirates.

World's Tallest Building Base Jump

7 minutes, but worth it!

Office Space , Office Space Design

Will The Office Market Reach Bottom In 2010?

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From Cushman and Wakefiled's Knowledge Center


Things are looking up for a recovery and job growth in 2010 that will benefit North American real estate markets. Meanwhile, South American countries such as Brazil will continue to heat up.

National real estate markets are likely to remain weak particularly early in the year due to uncertainty about the strength of the recovery. This will benefit tenants seeking to secure moderately priced space.

But as recovery takes hold, markets will reach a bottom and begin to improve. The key will be employment growth which, because of the depth of the downturn, may turn out to be stronger than is generally anticipated."

What struck me in this quick overview is that the bottom is a ways away. With last weeks jump in newly laid-off workers filing claims for unemployment benefits, the recovery may be further away than we hope. Unemployment is directly linked with office vacancy. Businesses must add employees to take on additional office space. I believe that there is still a lot of underutilized office space that companies have leases on, but are not using that will have to be filled before we see any reduction in the office vacancy rate. A recovery in 2010 would be great, but I believe the Office Space market will not start it's recovery until 2011.

I am off next week. Happy Holiday to all.



Commercial Real Estate , Lease Negotiations , Office Rental , Office Space , Office Space Negotiations , Office Vacancy Rate