Cushman & Wakefield executive vice president David Gialanella sees a confluence of positive factors contributing to an upturn in New York City's office, industrial and retail sectors. "Several things are coming together for a more optimistic point of view," Gialanella says. "Low interest rates, low inflation, the rapid prosecution of the war in Afghanistan…the fundamentals are starting to shore up their weaknesses going into next year and we're starting to see the consumer coming back."
Gialanella says the New York industrial market, which was the first to feel the economic pinch, is also poised to be the first to recover. "Companies reduced production and were living off their inventories," he says. "Now they'll have to go back into production to build those inventories." Warehouse, distribution and manufacturing space will all be in demand come next year, Gialanella says.
Troni also predicts an upturn in the industrial sector, particularly on Long Island, as the area's former tenant base of defense manufacturers slowly gets back in the game. "The fact that defense manufacturing is going to increase through government spending" should create "a surge in the tenant base," Troni says. "Occupancies will probably send those markets back to their core of defense manufacturing."
The near-term outlook for Manhattan office space is "guardedly optimistic, at least for Midtown," says Elisabeth Troni, director of research for Newmark & Co. Real Estate Inc. "I think the town will probably hold on but whenever there's a turn in the market, Downtown suffers first." According to Troni, the current economic downturn "and no concrete plan for the future of Downtown," bodes ill for Lower Manhattan. "Vacancies will increase across the board in Manhattan, but especially Downtown," Troni says.
Companies that held off on capital improvements this year will be more or less forced to invest in their businesses in 2002, Gialanella says. "There will be more demand for office space as a result of the fact that companies are investing more heavily in their core businesses than they did in 2000. That's a pretty good formula for growth."
On the retail front, the market "has definitely slowed down already." Troni says many retail deals have been put on hold, particularly in "fringe areas and marginal areas that are seen as trendy." But "prime retail strips," depending on lease rollover dates, "will probably hold steady with minor fluctuations."
Retail will trail behind office and industrial until the middle of next year, Gialanella says. Even so, his forecast for the retail sector is on the sunny side. "We're starting to see the consumer coming back. Around the end of the first quarter, there will be an increase in demand for retail space as a result of the fact that consumers are now getting more optimistic and coming back into the market."
"Guarded skepticism" is Troni's read on the hotel market. "The few plans that were on the boards have been scrapped.
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