to come.” She says sublease space may
eventually comprise 40% of the total
amount of available space, as it did during the dot-com bust.
The sheer volume of sublease availability poses a challenge to building
owners, Geiger says. “Sublease space
tends to pull rents downward because
sublessors are less price sensitive. As the
amount of sublease space increases, so
does the competition for tenants, especially since this space is finished and
frequently furnished. If the sublessor is
facing financial distress, the landlord
could be in danger of not receiving
rent. Depending on the size of the tenant, that could cause a serious disruption to the property’s cash flow.”
However, Alexander says, “We have
great faith in the New York market.” In
the long term, the financial services sector will be in growth mode again, even
though the short term means more layoffs and up to 15 million square feet of
space becoming available in ‘09.
Much of that space will come from
large-scale tenants that no longer exist
as separate corporate entities, notably
Lehman Brothers. The silver lining to
the consolidation among financial services giants, Alexander says, is that some
of these institutions will become larger
and more powerful as a result.
And the short term also presents op-
Source: Cushman & Wakefield Research
Source: CB Richard Ellis
portunities, as boutique firms grow and
therefore increase their space requirements, possibly snapping up re-priced
space although perhaps not in the same
proportions as the now-fallen financial
services giants. Pointing out that there
are now 16 blocks of 250,000 square
feet or more available across Manhattan, with as many as eight more joining
them this year, CBRE vice chairman Michael Geighegan predicts, “We could be
flush with large-block opportunities like
we haven’t seen in years.”
One of the 16 existing blocks cited
by CBRE is the 1.1-million-square-foot
11 Times Square, the speculative office property SJP Properties is building
on Eighth Avenue. Alexander says that
tower, along with Macklowe Properties’
forthcoming 510 Madison Ave., will “
absolutely lease up. They’re brand-new
product.”
Whether or not these properties figure in the future space requirements for
jumbo-sized office tenants remains to be
seen, but Alexander emphasized that
the current downsizing is not indicative
of space needs down the road. 2013 and
2014 will see rollovers on leases of 6. 2
million square feet, or about 20% of the
leased space the financial industry occupies. That means that planning for the
future will start this year and next.
The investment sales market also experienced some downsizing in 2008,
said William Shanahan, vice chairman
of CBRE's investment properties institutional group. Forty-seven trades
totaling $12.1 billion were transacted
in ’08, with nearly 60% of the total
coming from forced sales such as the
Macklowe/Deutsche Bank properties.
That compares with 128 sales totaling
$38.6 billion the year prior, and Q4 ’08
was particularly quiet compared to the
