Speaking at a seminar sponsored by FIABCI-USA New York Council, Fordham Real Estate Society and New York Commercial Real Estate Women's Network, "Looking Toward 2005 and Beyond--New York and the Global Economy," Arena pointed out that, even though the city has experienced job loss over the latest downturn, that loss was not as severe as the downturn in the early 1990s.
And things are looking up. In 2002, he said, there was 10 million sf of gross leasing activity compared to the 27 million sf projected for 2004. "This shows a continued confidence in the New York economy," he added. Even in areas where activity is sluggish and vacancy rates are higher, owners and developers are finding ways to avoid empty buildings by turning to adaptive re-use. Specifically, according to Arena, owners and developers are combating the 12.5% vacancy rate Downtown by converting 11.5 million sf of office space to residential use--with more requests for conversions filing in everyday. They are also looking beyond residential to educational and retail use. For example, New York Law School took space at a 250,000-sf Broad/Wall site and the National Sports Museum inked a deal for 26 Broadway, he said.
However, the city supply does have some weaknesses--especially with large amount of office space scheduled to come online Downtown with the redevelopment of the World Trade Center site. Other new developments adding to the weakness are the new Penn Station, which will put 1.5 million sf of new space on the market, a possible new stadium for the New York Jets and the entire focus on West Side redevelopment, Arena said.
There are also demand opportunities offering a ray of light on the commercial real estate market, he explained, including the continued flight to quality space, new industries moving Downtown (particularly the Lower East Side) and the expansion of companies and office tenants.
"New York is always reinventing itself," Arena said. "It is attractive to people who are not here." For example, he pointed out, Bank of America's plans to build a two-million-sf office building across from Bryant Park.
But these opportunities are not without demand threats. Business are continuing to look to move some operations outside the city, like Morgan Stanley committing to space in Westchester County; companies are still sending jobs overseas, like Goldman Sachs and Lehman Bros. Security issues are still a concern, he said. Despite the challenges the city faces now, however, Arena remains positive on the local market. "The people in this city are the reason corporates stay here and why corporates want to come here," he concluded," and this city will always reinvent itself. New York City will overcome future demand and supply shocks."
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