Krasnow explained that, while the city's asking rents have continued to slip, averaging about $41.97 in 1Q as opposed to $45.69 in the same quarter last year, vacancy rates have held steady. Overall, Manhattan saw office vacancies at 12.3% in the first quarter, fairly consistent with the fourth quarter's 12% average but still a drop from the 10.4% rate experienced in the first quarter of 2002.
But whether or not the industry has emerged from rock-bottom numbers has yet to seen. The determining factor will be the length of the war and the corresponding rebirth in the economy and job market, said Kransnow.
"If it's a short campaign, we should see a rise in economic recovery in terms of increased corporate spending, productivity and job creation," he stated. "If it's a prolonged war, it will send us back into a recession."
He explained that a lengthy military campaign will only add to the last two years of uncertainty and further delay corporate decision-making, which will result in increased vacancies. If the US sees a short end to the Iraqi conflict, C&W anticipates a turnaround by the first quarter of 2004, according to Krasnow.
In addition, the economy's turnaround tends to precede that of the real estate sector, he said. "Unlike the stock market, real estate [performance] changes once people's hopes and fears become a reality, which could be three months to a year after we see the initial signs of economic growth."
One area already poised for recovery is Lower Manhattan. C&W reported a significant drop in vacancies in the region, from 13.7% in February '03 to 13.3% in March, and asking rents continue to hover in the $38-range.
However, class A space in this sector continues to have trouble attracting tenants. Vacancy rates in the first quarter were the highest in the city, at 16.3%, compared to 11.1% in Midtown and 7.7% in Midtown South.
"Some of the best space in Manhattan is clearly available Downtown at a significant discount," said Krasnow, noting that C&W is starting to see companies take advantage of the low rents, business incentives and grants being offered South of Chambers Street.
For example, Lower Manhattan's vacancy rate, while high, is still a significant drop from February's 17.2% average. This is partly attributable to three major leases in the neighborhood: New York City Teachers Retirement Fund took 157,000 sf at 55 Water St.; the City of New York grabbed 22,000 feet at 40 Rector St., and Shepardson Stern & Kaminsky captured 20,000 sf at 88 Pine St.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
