NEW YORK CITY—Apologies to economists and statisticians but sometimes, it appears, a handful of numbers don't tell a whole story.
In early 2016, reports indicated that landlords were “repricing”—or lowering rents—on existing inventory, and speculation began that it was the beginning of the end of the up cycle.
But a new report from Colliers International, obtained EXCLUSIVELY by GlobeSt.com, indicates that several factors were at play, and none of them included a doomsday scenario.
“At the beginning of the year, there was apocalyptic talk about the market shifting because some landlords were cutting prices,” Colliers' Craig Caggiano, executive director, New York tri-state region acknowledges to GlobeSt.com. “But it's problematic to take one piece of information and extrapolate a trend. We decided to wait until we had the full quarter's results.”
In so doing, officials at the real estate services firm noted that space being repriced was a small percentage of the market and, in many cases, that inventory had been on the market for as long as 22 months and was likely priced too high from the start.
Explains Caggiano, “In all the available inventory, half was already priced above market average, and then, after repricing, it was still above market average. There may have been some outpacing of the market and this was pullback. It was typical market shifts that are made when space is on the market for a long time.”
Adds industry veteran Joseph Harbert, president, Eastern region, “Pricing went as high as it was going to go in several spaces. There's nothing wrong with demand; velocity is up. But there's always repricing going on, landlords might have put out a price out just to see if someone would come along.”
He concedes, “There was a sloppiness about expectations that the market was going to keep going up. But overall, there is more upward pricing than downward.”
In fact, according to Colliers' research, Manhattan's average asking rent increased in the first quarter by 1.3% to $72.46 per square foot. In fact, asking rents were up across all three submarkets—Midtown, Midtown South and Downtown—in 12 out of the 17 sections of those areas and in all three building classes.
Midtown did see 4.2% of space re-priced downward, compared to 1.3% priced higher. But Midtown South actually had more upward than downward re-pricing. Pricing was lower on 3% of the available inventory but was higher on 3.4% of the total available space. Downtown also had more available space re-priced lower, 3%, than raised, which was just .8% of inventory. But two sublet blocks with below-average asking rents were taken off the market: 55 Water St. and 1 State St. Both of them had asking rents more than 20% below the Downtown average.
“Any repricing is not the single factor that determines average asking rent at end of the quarter,” notes Franklin Wallach, senior director, New York research group. “Asking rents still went up.”
Colliers' message is simple: there's no need for panic. Asserts Caggiano, “If an airplane was flying at 33,000 feet and dropped to 1,000 feet, you'd feel it. But you'd still be at a cruising altitude.”
In early 2016, reports indicated that landlords were “repricing”—or lowering rents—on existing inventory, and speculation began that it was the beginning of the end of the up cycle.
But a new report from Colliers International, obtained EXCLUSIVELY by GlobeSt.com, indicates that several factors were at play, and none of them included a doomsday scenario.
“At the beginning of the year, there was apocalyptic talk about the market shifting because some landlords were cutting prices,” Colliers' Craig Caggiano, executive director,
In so doing, officials at the real estate services firm noted that space being repriced was a small percentage of the market and, in many cases, that inventory had been on the market for as long as 22 months and was likely priced too high from the start.
Explains Caggiano, “In all the available inventory, half was already priced above market average, and then, after repricing, it was still above market average. There may have been some outpacing of the market and this was pullback. It was typical market shifts that are made when space is on the market for a long time.”
Adds industry veteran Joseph Harbert, president, Eastern region, “Pricing went as high as it was going to go in several spaces. There's nothing wrong with demand; velocity is up. But there's always repricing going on, landlords might have put out a price out just to see if someone would come along.”
He concedes, “There was a sloppiness about expectations that the market was going to keep going up. But overall, there is more upward pricing than downward.”
In fact, according to Colliers' research, Manhattan's average asking rent increased in the first quarter by 1.3% to $72.46 per square foot. In fact, asking rents were up across all three submarkets—Midtown, Midtown South and Downtown—in 12 out of the 17 sections of those areas and in all three building classes.
Midtown did see 4.2% of space re-priced downward, compared to 1.3% priced higher. But Midtown South actually had more upward than downward re-pricing. Pricing was lower on 3% of the available inventory but was higher on 3.4% of the total available space. Downtown also had more available space re-priced lower, 3%, than raised, which was just .8% of inventory. But two sublet blocks with below-average asking rents were taken off the market: 55 Water St. and 1 State St. Both of them had asking rents more than 20% below the Downtown average.
“Any repricing is not the single factor that determines average asking rent at end of the quarter,” notes Franklin Wallach, senior director,
Colliers' message is simple: there's no need for panic. Asserts Caggiano, “If an airplane was flying at 33,000 feet and dropped to 1,000 feet, you'd feel it. But you'd still be at a cruising altitude.”
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