NEW YORK CITY—Despite forecasts of uncertainty—or even pessimism—office markets around the city fared well in the second quarter of 2016, according to newly released research from CBRE.
Provided during a media briefing Monday in Midtown, the report indicates that the office market citywide is in a holding pattern, while each of Manhattan's three office submarkets have some positive data to report.
Meanwhile, Brooklyn's office market continues to thrive while the retail sector across the city is adapting to changing times, according to some CBRE's professionals.
“Availability has tracked within 80 basis points of the current 11.1% for the past five-and-a-half years,” stated Paul Myers, EVP. “At this level, landlords and tenants have an even hand in their negotiations. We have not seen a radical shift in year-to-year pricing since 2008 or 2009.”
Even in the midst of geopolitical chaos, economic challenges and civil unrest throughout the country, market fundamentals remain solid, added Ken Meyerson, vice chairman. “Leasing velocity is strong—and there is very little sublease space on the market. NYC employment is still growing and most of our clients are expanding.”
He continued, “Even flat rents at these levels still indicate fundamentals in the city's overall leasing market. The amount of pessimism we see isn't accurate. Just because rents are not going up doesn't mean they're coming down. It's a healthy market.”
More specifically, he noted, “Downtown continues to be a hotbed of activity. The availability rate is lower than it is in Midtown for first time in 44 months, so the perception of an oversupply in the submarket isn't reality.”
Still, though it may not be at a concerning level, there is some softness in the market, according to CBRE. Office leasing activity in all three Manhattan submarkets fell from the five-year quarterly average, with Downtown dropping 19% below that metric to 1.1 million square feet of activity; Midtown South, 21% to 1.03 million and Midtown slipped just 2% below, with 3.73 million square feet of activity being transacted there in the second quarter.
In Brooklyn, the average asking rent spiked in Q2 to $37.58 per square foot, representing a 15% gain year-over-year and a 1% increase from the first quarter's $37.28 per square foot. Despite rising prices, Manhattan-based firms continue to relocate to Brooklyn, noted Travis Yuengst, sales director.
However, he asserted, a great deal of office inventory is in the pipeline, creating cause for concern. “There is roughly six million square feet coming online between 2017 and 2020. That averages out to 1.5 million square feet every year. Both inbound and organic demand across the borough needs to catch up with supply.”
Meanwhile, investment sales activity is being driven by foreign investment, explained William Shanahan, vice chairman. “The big story is Brexit and we think it'll be positive. There's a flight to quality New York City's continuing strong employment growth, healthy economic outlook and positive business environment make it one of the most highly sought-after markets for global investment.”
On the retail front, companies still value a a presence in NYC but as they grapple with the battle between online and brick-and-mortar sales—as well as a dip in foreign visitors here—reinvention is the name of the game.
“We remain steadfast in the belief that New York is the place to be and retailers want to expose themselves to the marketplace,” asserted David LaPierre, vice chairman. “Recent openings of concept stores from major brands, such as Samsung in the Meatpacking District and Cadillac in Hudson Square, have shown that brick-and-mortar strategies for non-traditional brands are a part of the next wave of retail.”
Provided during a media briefing Monday in Midtown, the report indicates that the office market citywide is in a holding pattern, while each of Manhattan's three office submarkets have some positive data to report.
Meanwhile, Brooklyn's office market continues to thrive while the retail sector across the city is adapting to changing times, according to some CBRE's professionals.
“Availability has tracked within 80 basis points of the current 11.1% for the past five-and-a-half years,” stated Paul Myers, EVP. “At this level, landlords and tenants have an even hand in their negotiations. We have not seen a radical shift in year-to-year pricing since 2008 or 2009.”
Even in the midst of geopolitical chaos, economic challenges and civil unrest throughout the country, market fundamentals remain solid, added Ken Meyerson, vice chairman. “Leasing velocity is strong—and there is very little sublease space on the market. NYC employment is still growing and most of our clients are expanding.”
He continued, “Even flat rents at these levels still indicate fundamentals in the city's overall leasing market. The amount of pessimism we see isn't accurate. Just because rents are not going up doesn't mean they're coming down. It's a healthy market.”
More specifically, he noted, “Downtown continues to be a hotbed of activity. The availability rate is lower than it is in Midtown for first time in 44 months, so the perception of an oversupply in the submarket isn't reality.”
Still, though it may not be at a concerning level, there is some softness in the market, according to CBRE. Office leasing activity in all three Manhattan submarkets fell from the five-year quarterly average, with Downtown dropping 19% below that metric to 1.1 million square feet of activity; Midtown South, 21% to 1.03 million and Midtown slipped just 2% below, with 3.73 million square feet of activity being transacted there in the second quarter.
In Brooklyn, the average asking rent spiked in Q2 to $37.58 per square foot, representing a 15% gain year-over-year and a 1% increase from the first quarter's $37.28 per square foot. Despite rising prices, Manhattan-based firms continue to relocate to Brooklyn, noted Travis Yuengst, sales director.
However, he asserted, a great deal of office inventory is in the pipeline, creating cause for concern. “There is roughly six million square feet coming online between 2017 and 2020. That averages out to 1.5 million square feet every year. Both inbound and organic demand across the borough needs to catch up with supply.”
Meanwhile, investment sales activity is being driven by foreign investment, explained William Shanahan, vice chairman. “The big story is Brexit and we think it'll be positive. There's a flight to quality
On the retail front, companies still value a a presence in NYC but as they grapple with the battle between online and brick-and-mortar sales—as well as a dip in foreign visitors here—reinvention is the name of the game.
“We remain steadfast in the belief that
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