SANTA ANA, Calif., Sept. 17 /PRNewswire-FirstCall/ -- Grubb & Ellis
today issued the following special report regarding the New York Office
Market. To receive a copy of the full report or to speak with the report's
author, Richard Persichetti or David Arena, President of Grubb & Ellis
Company, NY, please contact Janice McDill at 312.698.6707 or via email
janice.mcdill@grubb-ellis.com.
(Photo: http://www.newscom.com/cgi-bin/prnh/20080917/AQW092)
Lehman Brothers' bankruptcy filing and Bank of America's buy-out of
Merrill Lynch will not only permanently alter the global banking landscape,
it will also have implications for the New York office market. The biggest
impact will come in the form of available sublease space, since the two
firms occupy approximately 6 million square feet in Manhattan. In addition,
the struggles at AIG need to be closely monitored, since the firm owns and
leases close to 3.5 million square feet of office space in Manhattan.
Although the Federal Reserve bailed out the world's largest insurer, AIG,
the company's Manhattan portfolio could be restructured since the U.S.
government is now in charge.
The additional sublease space will increase options for tenants and
inevitably drive vacancy higher. At 5.7 percent, the Manhattan vacancy rate
is already up 120 basis points since 2007. Since the start of 2008, 2.1
million square feet of sublease space has been placed on the market, and
that number is expected to grow as the fall-out from the credit market
turmoil continues. The growing sublease inventory will likely cause asking
rents to decrease in the last quarter of this year and into 2009. As
landlords begin to price direct space more competitively with discounted
subleases, expect overall average asking rents to decline by approximately
7 percent over the next 12 months.
In August, the increase in marketed subleases altered the ratio of
direct versus sublet available space. Sublease space now accounts for 25
percent of the market's availability rate, compared to the 22 percent
market share averaged over the last 19 months.
The financial services sector has already shed between an estimated
22,000 and 25,000 jobs this year. However, after the Lehman and Merrill
announcements, New York Governor David Paterson, stated that an additional
40,000 Wall Street job cuts could occur. These projected job losses
translate into approximately nine to ten million square feet of occupied
office space, which if placed on the market would increase the vacancy
level to 8.5 to 9.0 percent. In New York, this vacancy range is accepted as
market equilibrium, or a healthy market balance. Although an increase in
vacancy would give tenants more space options, the additional inventory
will keep negotiations between landlords and tenants on an even playing
field.
SOURCE Grubb & Ellis
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Related links:
http://www.grubb-ellis.com
Photo Notes:
NewsCom: http://www.newscom.com/cgi-bin/prnh/20080917/AQW092
PRN Photo Desk, photodesk@prnewswire.com
http://www.prnewswire.com/comp/136726.html/
CONTACT:
Janice McDill of Grubb & Ellis,
+1-312-698-6707, janice.mcdill@grubb-ellis.com
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