THE RIGHT OFFICE AT THE RIGHT PRICE!
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Help will come by way of:
(1) Reduced Rental Rates: A modest reduction in office rental rates is expected.
(2) Increased Tenant Incentives: These can include: (a) the amount of free rent given in the lease; (b) a Landlord’s willingness to provide a “build-to-suit” office; and (c) the cash contribution paid to a Tenant when it constructs its own office.
(3) More flexibility in the Lease Term: As the market cools some Landlords will agree to lease space for shorter terms. During the peak, many building owners insisted on a 7- 10 year lease to “lock in” the higher rent. In the future, lease terms of as little as 3 years should be available.
(4) Building Improvements and Enhanced Amenities: The recent strength of the office market encouraged Owners to invest in building upgrades including new lobbies and infrastructure (elevators, security, HVAC, Life Safety Systems, etc.). Tenants signing new leases will benefit from these improvements. Some buildings now offer exclusive amenities to its Tenants such as concierge service, a meeting room, conference facility and health club.
Evidence of an Office Leasing Slowdown
Many Landlords are just now recognizing the office leasing slowdown. Year-to-date there has been a noticeable reduction in interest by new Tenants as evidenced by fewer space tours and lease proposals. This is predictive of fewer lease transactions in the coming year. Additionally, vacancy rates are increasing. According to CoStar, the Commercial Real Estate Information Company, in the second quarter of 2016 the Vacancy Rate was 7.8%. It jumped to 8.2% in the third quarter. Another revealing indicator is Net Absorption. Net Absorption measures the net change in occupied space. Net Absorption for the overall New York City office market was negative (606,701) square feet in the third quarter 2016. That compares to positive 1,809,982 square feet in the second quarter 2016.
Office Leasing Slowdown in the News
The office leasing slowdown has been reported in real estate industry and general business publications.
September 28, 2016 08:00AM By Adam Pincus
Report: Signs point to slowdown in TAMI market
The TAMI sector has been one of the biggest stories of the past couple years, and in 2015, the workforce grew by 5.4 percent, while existing TAMI tenants expanded 71 percent more than in 2014.
Shared office space companies like WeWork, Coworkrs, and The Yard have been taking spaces all over Manhattan and Brooklyn – WeWork alone leased a total of 900,000 s/f in 2015, accounting for three percent of all Manhattan leasing.
But despite the growth, some signs are pointing to a possible slowdown. Link here for entire story: http://rew-online.com/2016/03/15/report-signs-point-to-slowdown-in-tami-market/
After five years of record growth, signs of stress are emerging in New York City’s real estate market, especially in the past three months. Although new office leasing hit 28.2 million square feet last year, the third-highest Manhattan total in a decade, the figure is 14% below 2014 levels, according to a year-end report from Cushman & Wakefield. Link here for entire story: http://www.crainsnewyork.com/article/20160112/REAL_ESTATE/160119959
ABOUT COGENT REALTY ADVISORS
Cogent Realty Advisors is an independent and licensed NO FEE Realtor with over 15 years of experience representing businesses that lease NYC office space. Our goal is to secure the right office for your business at the right price. For information, phone Mitchell Waldman at (212) 509-4049
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