Certainly, June results suggested such an uptick, with both CBRE and Cushman & Wakefield reporting a dramatic jump over the previous month. CBRE reported June leasing activity throughout Manhattan of 1.47 million square feet, compared to 980,000 square feet in May; C&W puts the tally at 1.7 million square feet, surpassing May and June totals combined.
However, both firms also cautioned that it remains to be seen whether this signals a trend, and Myers observed that year-to-date leasing suggests that 2009 will go down as the weakest 12-month period since CBRE has kept track. CBRE says 5.9 million square feet has been leased YTD; Cushman says it's 6.3 million.
Either figure, though, is way off from historical averages, and Myers observed "that's a lot of ground to make up" in the last six months of the year. VP Peter Turchin said the last few months of the year will be the ones to watch for leasing velocity, following the mid-summer doldrums.
Nonetheless, June gave way to July with a flurry of deals of more than 100,000 square feet each--an encouraging sign for owners who want to see volume, said Turchin, who spoke from the landlord perspective. The biggest was the 240,930-square-foot, 10-year renewal at 51 W. 52nd St. by law firm Wachtell Lipton Rosen & Katz, followed by Showtime Networks at 1633 Broadway, re-upping for 15 years on its 202,495-square-foot space. A CBRE team of Michael Laginestra, Scott Gottlieb, Andrew Sussman and Michael Wellen was involved in both deals.
Earlier this week, L&L Holding Co. announced that longtime subtenant Bonnier Corp. converted its 100,750 square feet into a direct lease at 2 Park Ave. In each of these cases, the space never reached the market, said Turchin.
These deals all occurred in a Midtown environment where the current asking rent averages $60.45 per square foot, down more than 30% from the June 2008 average of $86.57. In Midtown's top-tier buildings, the net effective rent stands at an average $63 per square foot, off 45% year-over-year, based on nine transactions YTD, according to CBRE analysis.
Myers, who generally represents tenants in leasing negotiations, said his clients have been asking the following questions: how far have asking rents dropped; how far have effective rents dropped; when will the market reach bottom; what will the bottom be; and when should the tenant act. As to when the bottom will occur, he said, "We almost never answer this, because we don't know."
That being said, Myers and Turchin offered some signs to watch out for regarding both an approaching bottom and a recovery. Along with a sustained uptick in leasing activity, Myers advised watching for rising unemployment and withdrawal of sublease space. Landlords, who lately have taken to not listing their rents, will start doing so again, Turchin said. When the market begins to recover, owners will start toughening up on rent concessions and leasing terms, "and you'll see more fair market renewals."
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
