Report: First Dip in Midtown Rents Since '02

NEW YORK CITY-For the first time since 2002, occupancy costs for Midtown office tenants have declined year over year. CB Richard Ellis’ semiannual Global MarketView/Office Occupancy Costs survey says the same for London and Tokyo, which suffered steeper year-over-year drops than the 2.7% dip reported for Midtown. However, Raymond Torto, CBRE’s chief economist, tells GlobeSt.com that New York City will see sharper declines in rents and other occupancy costs next year, and a forecast from Newmark Knight Frank reaches a similar conclusion.

“There won’t be such a sharp divide” in 2009 between fast-growing markets such as Abu Dhabi and those with declining rents such as London’s West End, says Torto. Next year will see growth in occupancy costs–which averaged 8% among the 172 markets monitored in the survey–level off, he says.

And if the declines in occupancy costs from Q3 2007 to Q3 2008 were steeper in London and Tokyo than in Midtown, Torto says it may be that those two cities had a head start over New York City. “London’s West End started to see an adjustment about a year ago,” he says. However, even with a 17.2% decline in occupancy costs, the West End remains the world’s most expensive office market at $248.66 per square foot, compared to $98.06 in Midtown.