NEW YORK CITY-Research Services at Cushman & Wakefield, led by Maria T. Sicola, senior managing director, and Janice Stanton, managing director, have released the company’s November 2000 forecast for the metropolitan area. The report reviews submarkets such as Midtown, Midtown South and Downtown. It also contains an investment review for Manhattan.

Speculative development limited by wary financers that require at least 50% of a new venture to be pre-leased before committing a loan, vacancies are historic lows, rents are at historic highs and the economy is slowing. The national market has become unusual, to say the least, and the New York market particularly so. This may be what aids it in the end, though.

“Midtown vacancy should begin to increase in 2001. This increase is not a reflection of a softening market but represents a frictional increase–as tenants move to larger quarters at development projects, they leave behind significant blocks of space,” the report explains in its outlook predictions for Midtown. These vacancies will “likely be leased before they are officially vacated,” but as C&W predicts some will hit the market as vacancies, it predicts the rate here could hit more than 4% in 2002. The researchers also speculated that the construction of an Olympic stadium for 2012 games “could spur further West Side development and “transform Midtown.”

The slight loosening of the Midtown South market is characterized as “actually good news for the overheated” submarket. Rents there have doubled in the last two years and the researchers suggest that a “more stable demand pattern should allow for healthier market practices.” They predict, “Rental growth is likely to continue to be extremely strong… with average asking rents likely to break $50 per sf by the end of 2001 and surpass $54 per sf by the end of 2002.” The researchers warn that this area could be hit hard in economic bad times because the tenants in the area are not “best-credit” tenants.

Downtown rents are climbing to new highs, approaching those in Midtown South, and vacancies are at record lows. C&W forecasts the rent rates will continue to rise and the vacancy rate will continue to fall, but that New Jersey and the outer boroughs could draw tenants from Downtown across the Hudson and East Rivers in search of lower rents and tax incentives. “Goldman Sachs… has yet to open a major office in Manhattan outside of Downtown. But don’t look for any space dispositions as a result of their acquisition–the white-shoe firm has performed so incredibly well that even more than two million sf of Downtown expansion over the past three years cannot quench its space needs.”

For the Manhattan market as a whole the outlook is for cap rates to “remain at or below 8% for most class A assets.” Midtown sales prices for top properties are expected to remain at over $400 per sf and $300 per sf Downtown. C&W points to the number of landmark properties on the block now, including the World Trade Center, Rockefeller Center, Chrysler Building, the GM Building, Citicorp Center and the Empire State Building. Research Services also note that REITs are performing better and their stocks are trading higher and could be expected to place “some winning bids” on significant properties.

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