The outlook for office space vacancy rate in the Manhattan office space market is not pretty for Landlords. Vacancy rates are predicted to increase from around 5% a year ago to between 11% and 17%, depending on where you get your numbers. Third quarter results show that Manhattan office vacancy the highest in over 2 years at around 7.5%. I can't imagine that this will come as a surprise to anyone in the industry. The October Financial Crisis resulted in the loss of thousands of jobs in Manhattan. New York state is predicting that 160,000 state residents could loose their jobs because of the economic downturn. The New York City Comptroller predicts that up to 165,000 people could loose their jobs in NYC over the next two years. At 200 square feet per person, that is around 33 million square feet that could go empty. Put that together with a bleak outlook for our economy and the result will be an increase in office space vacancy. It is expected to happen quickly. Many pundits predict that we will have vacancy rates in Manhattan between 9% and 10% by the end of the year.
It is bad news for Landlords, but also presents many great opportunities for Tenants in the market. Tenants will have much greater negotiating power. Some Manhattan Landlords are even offering up to one year of free rent on 10 year leases. Sublease space available for lease has nearly doubled from 3.5 million square feet a year ago to 6.5 million square fee now. Rental rates in Manhattan are still some of the highest in the world averaging around $73.00 / sf / year. It is expected they will to decline in the neighborhood of 15% to 20% over the next year as the full extent of the vacancy rate climb is realized and as company trim their staffs to survive a bleak economy.
If you are in the market now, plan to be in the next 12 months, or have a renewal coming up within the next 2 years, it is a great time to start looking at your options. The best way to do that is to make sure and work with a professional tenant rep. There is very rarely any cost to you to obtain their services. Landlords are in the business of renting space. You run your business and are likely only lease space a few times in your business career. Level the playing field with a professional who is on your side and in the office leasing business on a daily basis.General , Manhattan Office Space