Manhattan Office Rents Plummet

Helluva bad time to be sitting with lots of vacant office space:

“Manhattan office rents fell the most in at least 25 years in the first quarter as financial companies slashed jobs and relinquished space in the U.S. recession.

Rents dropped 6 percent from the fourth quarter to $65.01 a square foot, commercial property broker Cushman & Wakefield Inc. said in a report today. The decline is the most in records dating back to 1984, Cushman said, and shows how much the fallout from the September bankruptcy of Lehman Brothers Holdings Inc. hurt the New York property market.

“It’s gone beyond the financial firms,” Joseph Harbert, Cushman & Wakefield’s chief operating officer for the New York region, said in a telephone interview. “It’s broad across a lot of industries. Everybody has the same way of thinking, which is low confidence in job growth, consolidation, cutting expenses, not hiring unless you really have to.”

The recession has eroded demand for commercial property as companies fire workers and consumers rein in spending. The Bloomberg REIT Office Property Index of 14 companies is down 28 percent this year. In New York, the amount of space available for sublease approached a five-year high in the first quarter, Cushman said.

Space for sublease helped push the overall vacancy rate in Manhattan to 9.6 percent from 6.1 percent a year earlier, the highest since the third quarter of 2005, the report said.

Rents are “falling faster than they did in the last two recessions,” Harbert said.

I can tell you from first hand experience there was absolutely no negotiating with commercial landlords in 2006 — it was take it or leave it.

Today? A VERY different story.


Manhattan Office Rents Fall Most in Quarter Century
David M. Levitt
Bloomberg, April 7 2009

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