Vacancy Rate of 25% Reported in New York Telecom Space

NEW YORK CITY-The New York City telecom real estate market is healthier than the rest of the nation’s, but increased sublease space and new construction could drive down prices unless the economy recovers sooner and stronger than expected.

Third-quarter figures compiled by Grubb & Ellis reveal a 25% vacancy rate in existing telecom space in the New York City market and a 28.8% rate in Northern and Central New Jersey. The national vacancy rate is 38%.

Telecom space is defined as 75% dedicated to telecom use, which includes data centers, co-location facilities and web hosting facilities. The buildings house a very low number of employees and entail special attributes include enhanced security and power sources, fiber connections and climate control.

“Prior to Sept. 11, the New York market was beginning to soften because of a lot of new construction but it’s stronger than other markets,” says Chris McDougall, national director of research at Grubb & Ellis. “There’s just under a million sf under construction in Manhattan with about two-thirds of that preleased.” An additional 700,000 sf of telecom space is in the planning pipeline and due to break ground soon, McDougall says.

Pricing will continue to soften in New York because a little over one million sf of telecom space is available for sublease, according to McDougall.

New York is the largest telecom real estate market in the country, totaling about 8.5 million sf. The average price for space in New York is $55 sf compared to a national high end asking price of $42, down from $55 only one quarter before.