Crain’s New York
January 12, 2016
Also, don’t expect a wave of new condo development, according to a Cushman & Wakefield report
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 released Tuesday morning.
The drop came as several of the bulwarks of the bull market—including a steep rise in retail rents and a booming property sales, from residential towers to development sites—lost steam.
“Last year was a great year, but as we progressed we began to see some cracks emerging,” said Bob Knakal, the head of property sales for Cushman.
While the dollar volume of such transactions soared to $74.5 billion last year, the number of transactions—the ultimate barometer of the market’s health—sagged. He noted that a decline in activity accelerated in the fourth quarter, and that such softness is now being reflected in prices of raw land. For example, he pointed to a couple of Manhattan properties that sellers thought would command prices of $700 to $800 per buildable square foot that had instead drawn bids of $600 to $625 per square foot. In both cases, the seller decided to put off the transaction.
The weakness in the pricing of developed properties has been led by a cooling in the formerly white-hot market for retail space. Per-square-foot retail rents that topped out in four-digit-dollar sums in areas such as Fifth Avenue and Times Square have softened. That trend shows no sign of abating in 2016.
“We do see a slowdown in rents and more vacancies,” said Joanne Podell, Cushman’s head of retail leasing. She noted that on the gilded strip of Fifth Avenue, the city’s priciest in terms of leasing cost per square foot, rents ebbed 8.5% last year. Meanwhile, in the trendy meatpacking district, the amount of retail space available to rent jumped nearly 20% last year. And farther south, in SoHo, she said that so many spaces are available that “much of the talk is about how difficult the market is.”
Photo by Buck Ennis
