Editor’sPage
Cruising Speed
As 2008 gets under way, maybe the best analogy for what’s happening in New York commercial real estate comes from Howard S.
Fiddle, vice chairman at CB Richard Ellis.
Decelerating from 100 mph to 60 mph, he remarks in
this month’s cover story, gives you the impression that
you’ve stopped. And perhaps the industry has slowed
from a velocity that’s just about off the scale for many
car speedometers. But 60 mph, by any reasonable
measure, is still cruising speed.
A case in point: the Manhattan office market saw
30 leasing deals of 100,000 sf or more last year, off
considerably from the 42 such deals recorded in
2006, according to Cushman & Wakefield’s quarterly
report. However, says Cushman & Wakefield’s Joseph
Harbert, if you look back over the past decade, 30 big leases compares favorably with
the yearly average.
Also, 2007 set a new record for investment sales in Manhattan—including two at
year’s end that topped the $1 billion mark. (See this month’s “Metroline” beginning on
page 10.) Compared to the $34.7 billion that closed in 2006, nearly $48 billion closed
during 2007. The office market vacancy rate for the island declined from 6.7% to 5.7%
year over year. Similarly upbeat appraisals have been issued for the office markets in
Brooklyn and Westchester and Fairfield counties, by Cushman & Wakefield and others.
“Ah,” some would say. “Manhattan commercial investment sales hit a new high last
year—but so did writedowns in the financial services industry.” As this column was written, Ben S. Bernanke, chairman of the Federal Reserve, was signaling yet another rate
cut in the near future—possibly to be followed by further cuts as 2008 goes on, all the
way down to 3% if need be. The dreaded “R” word is being bandied about, and there
are fears that this will bring the region’s vacancy rates back up.
Or not. Commercial real estate isn’t like the stock market, although both are strongly
influenced by outside forces. Those forces make their impact on trading floor activity
within minutes; any hint of gloom in a Commerce Department report on employment,
for example, can bring the Dow Jones average down for the whole day. By contrast,
vacancy rates are among the last indicators to be affected, especially when those rates
are well down in the single digits. If a storm is brewing, it may blow over by the time it’s
time to renew leases.
The fact is that nobody—aside from time travelers who have visited the world of six
months from now—really knows what the year holds in store. However, the best guess-es are that to the extent any upcoming storm buffets the New York region, the real estate
sector will weather it.
Paul Bubny, Editor
pbubny@remedianetwork.com
Real Estate
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