09 aprile 2008

Aumentano gli affitti degli uffici di Manhattan, dice C&W

«Cushman & Wakefield today released its first quarter report for the Manhattan commercial real estate market showing continued increases in asking rents for office space throughout the city, despite a slowdown in leasing activity and an increase in vacancy rates.

Overall asking rents for Manhattan reached $67.13 per square foot at the end of the first quarter, up more than 25 percent from $53.43 at this time last year. Class-A asking rents soared more than 23 percent year-over-year, reaching an average of $79.78 per square foot.

At the same time, leasing activity continued to slow. At the end of the first quarter, five million square feet in new leases had been signed, about 8 percent off compared to first quarter leasing in 2007.

"Office leasing has slowed in the first quarter in direct response to economic uncertainty," said Joseph R. Harbert, chief operating officer for Cushman & Wakefield’s New York Metro Region. "Although we have not seen financial industry write-offs turn into major layoffs in New York, we have seen that financial services sector leasing demand has weakened."

The overall vacancy rate for Manhattan was 6.1 percent at the end of the first quarter, up from 5.7 percent at the end of 2007. This is still substantially below equilibrium of 7 to 9 percent. Equilibrium is the point at which neither tenants nor landlords are perceived to have an upper hand in negotiations. The vacancy rate for sublease space remained steady year-over-year, ending the first quarter at 1.1 percent, an indicator that we have seen few major blocks of sublease space hit the market.

"Commercial real estate is facing an uncertain economy from a position of fundamental strength," said Bruce Mosler, Cushman & Wakefield's president and chief executive officer. "Until this quarter, years of uninterrupted job growth fueled office leasing and investment demand and limited new construction kept supply in check in most major U.S. markets. On top of the fundamentals, New York, in particular, has a position of strength stemming from its reputation as the global financial and business capital."

Advertising agencies – buoyed by large deals like Ogilvy & Mather’s 564,000-square-foot lease at 636 11th Avenue – accounted for 15.8 percent of all new leasing activity, up significantly from 6.4 percent in 2007. Banking and financial services firms, which have consistently accounted for the majority of new leases, ranked second in the first quarter, accounting for 15.3 percent of all leasing activity, down from 30.7 percent at the end of last year. Legal services and business services, two industries that support financial services, both increased and accounted for 13.5 percent and 11.5 percent of leasing activity, respectively.

INVESTMENT SALES

After a record 2007 with approximately $48.5 billion in commercial real estate sales, volume slowed during the first quarter. Preliminary estimates recorded approximately $5.1 billion in transactions closed or under contract at the end of the first quarter.

The first quarter of 2008 was down significantly from the first quarter of 2007, largely due to uncertainty in the financial and debt markets and a lack of product for sale.

"Investors – like office tenants – are pausing to gauge the uncertainty in the economy and what impact it may have on the office leasing market," said Mr. Harbert.

Though minimal office space has been put back onto the market to date, investors have expressed short-term concerns about the leasing market, as it is unclear how much space may be given back as sublease space once companies adjust to the new economic realities.

"Despite the slowdown, a significant amount of capital is still focused on the Manhattan market," said Mr. Harbert, "and confidence is high over the long-term."

The supply constraints, which characterize the Manhattan market, taken together with a lack of new development and high barriers to entry, continue to keep the city on investors’ radars.

The current lending environment has caused a shift in the investor profile, with a noticeable increase in activity from foreign buyers and institutional investors. Foreign investors accounted for 45 percent of sales closed and under contract in the first quarter, a sharp contrast to last year when this type of investor accounted for only 15 percent of Manhattan’s sales volume.

"Recent actions by the Federal Reserve and the major financial institutions have made it clear that efforts are being made to recognize losses and put them behind us," said Mr. Harbert. "This is promising for the marketplace, and has helped to build confidence."

RETAIL

The upper tier of Manhattan’s retail market remained strong in the first quarter of 2008. Prime retail submarkets – namely Fifth Avenue and Soho – saw robust leasing velocity and rent escalations. Two high-profile leases on Fifth Avenue – Tommy Hilfiger at 681 Fifth Avenue and Diesel at 685 Fifth Avenue – increased asking rents there to $2,000-plus per square foot from $1,500 at this time last year.

In Soho, average asking rents increased to $280 per square foot, with available space on Broadway averaging $386 per square foot and Spring Street averaging $377 per square foot.

Though trouble in the economy has had an effect on several national retailers who announced store closings, Mr. Harbert noted that the impact has been felt more nationally than locally.

"Because we are a supply-constrained city, we’re still seeing strong demand, especially from foreign retailers crossing over into the Manhattan market," he said.

In addition to foreign retailers, overseas tourism has boosted the market, benefiting from the weak U.S. dollar. Despite declining consumer confidence, the Manhattan market has so far not been handicapped by the national picture» (CS della Società)

OFFICE MARKET STATISTICS BREAKDOWN
 

Manhattan	1Q ‘08	4Q ‘07	3Q ‘07	1Q ‘07
Total Vacancy	6.1%	5.7%	5.7%	5.7%
Sublease Vacancy	1.1%	0.9%	1.1%	1.1%
Overall Rent	$67.13	$65.08	$62.91	$53.43
Midtown	1Q ‘08	4Q ‘07	3Q ‘07	1Q ‘07
Total Vacancy	6.0%	5.8%	5.6%	5.3%
Sublease Vacancy	1.1%	1.1%	1.1%	1.1%
Overall Rent	$78.85	$76.26	$74.47	$62.89
Midtown South	1Q ‘08	4Q ‘07	3Q ‘07	1Q ‘07
Total Vacancy	5.0%	4.7%	4.7%	4.9%
Sublease Vacancy	0.4%	0.3%	0.5%	0.9%
Overall Rent	$48.95	$46.89	$45.83	$41.80
Downtown	1Q ‘08	4Q ‘07	3Q ‘07	1Q ‘07
Total Vacancy	7.2%	6.2%	6.7%	7.2%
Sublease Vacancy	1.7%	0.9%	1.0%	1.4%
Overall Rent	$50.28	$47.47	$45.86	$40.50»