Report: Job Loss Leads To Decline In City's Commercial Leases
A report released Tuesday shows that the decline in the real estate market has hit the commercial sector, as the number of new office leases across Manhattan has dropped to its lowest level in seven years. NY1’s Tara Lynn Wagner filed the following report.Cushman and Wakefield's end-of-year analysis breakfast in Midtown Manhattan Tuesday served as a wake-up call for the commercial real estate industry, as attendees tried to digest some startling realities.
“Clearly since the last time we spoke things have deteriorated dramatically in the United States economy and in the New York City economy,” said Cushman and Wakefield managing director Ken McCarthy.
That deterioration is evidenced by a 19 percent decline in new commercial leases in Manhattan, from 23.5 million square feet leased in 2007 to 19.1 million in 2008.
“That's the second-lowest year since 1997,” said Cushman and Wakefield Chief Operating Officer Joseph Harbert.
The drop in the number of new commercial leases is directly tied to rising unemployment numbers. The company says of the 1.9 million jobs lost between January and November 2008, about 800,000 of them were so-called “office-using jobs,” which were mostly tied to the financial services industry. Company closings and massive layoffs led to a glut of empty spaces, leaving 43 percent more available square feet than last year.
“Put that altogether and what do you have? You have prices going down,” said Harbert.
Oddly, prices have risen - $79.81 per square foot in Midtown in the last quarter of 2008 versus $76.26 in the same period of 2007. But in fact, prices dropped precipitously in the final three months of last year, from $84.48 in September.
“We don't recall seeing drops like this in the recent history,” said Harbert.
The one area where Cushman and Wakefield has yet to see a significant impact is the retail real estate sector, particularly on Fifth Avenue where the availability of space is low and rents exceed 2 thousand dollars a square foot.
Ultimately, experts say recovery will depend on a number of factors - the financial market, consumer confidence and the much-anticipated stimulus package from Washington, D.C. Where the bottom will hit is anyone's guess, but Harbert said is has yet to come.
“I think we're in the midst of the worse, so I think, yes, there will be some more pain, there will be some decreases in prices,” he said.