Topping Out?

At lunch yesterday someone raised the lurking question—“Have values topped out?” Since we were sitting in the middle of Manhattan sushi den, I presumed he was talking about the New York office market. And of course, New York is a special case—a unique, global gateway where everybody wants in and foreign money all too readily grabs for a piece of the action.

Given fundamentals, office pricing looks awfully dear and has for at least a year. In New York, West Side development is beginning and companies committing to new space are looking eagerly to downsize into more efficient quarters by as much as 20%. Virtually none of these big movers will be in expansion mode. Meanwhile, some prime existing buildings along Sixth Avenue are looking to fill space that’s been given back as technology encourages shrinking tenant requirements.