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'Hidden Space' Suggests Weaker NYC Office Market Conditions

NEW YORK CITY-Is the New York City office market in even weaker condition than its high vacancy rates indicate? One quarterly report suggests "hidden space" is a factor that needs to be considered.

By Barbara Jarvie | Updated on May 20, 2003

NEW YORK CITY-The latest quarterly market report from CRESA Partners LLC says vacancy rates in some submarkets may be 20% to 37% higher than most surveys show if two extra factors are taken into account: space that is leased, but unoccupied and space that is occupied, but available for lease. Neither aspect of so-called “hidden space” is usually reflected in market surveys.

Marcus Rayner, principal in CRESA’s New York office, says it suggests that tenants “have an increasingly broad range of choices and options under favorable terms, especially if they will consider shorter-term leases. On long-term deals, owners are maintaining a tougher negotiating position.”

The report also notes that the gap in asking rents between direct and sublease space is as much as 40% in some submarkets. “Tenants disposing of space need to reassess pricing on a monthly basis to remain competitive,” according to the report. “The ability to be flexible during negotiations has never been more important.” Rayner tells GlobeSt.com that this is a problem affecting all areas of Manhattan. “We’re seeing notable price corrections all over.”

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