New York Office Vacancy at 6-Year High as Wall Street Cuts Back
2002-04-04 15:33 (New York)
New York Office Vacancy at 6-Year High as Wall Street Cuts Back
New York, April 4 (Bloomberg) -- The New York office vacancy
rate rose to its highest level in six years in the first quarter,
as financial companies such as Merrill Lynch & Co., J.P. Morgan
Chase & Co., and UBS PaineWebber Inc. cut back on space.
The rate stood at 12.4 percent at the end of March, up from
11.7 percent the prior quarter and the highest since the end of
1996, when it was 12.8 percent, according to Newmark & Co. Tenants
have 18.1 million square feet of space up for sublease, the most
since the brokerage started keeping track in 1991.
The biggest U.S. office market is reeling from a slump among
Wall Street firms, which shed 43,300 jobs in the year ending in
February, the most in 25 years, as mergers and stock sales fell.
The largest block of space put on the market during the quarter
was 600,000 square feet at the World Financial Center downtown
offered by Merrill, which shed 9,000 jobs at the end of 2001.
``There is still space coming on the market and the leasing
pace is still slow,'' said Maria Sicola, senior managing director
of research at Cushman & Wakefield, another brokerage.
The amount of space put on the market in the quarter exceeded
the amount leased by 4 million square feet, a situation brokers
call ``negative absorption'' and continuing a trend started in
2001. Last year was the first time since 1994 that leasing didn't
exceed offerings of space, Cushman said.
Real estate is a lagging indicator of the economy, and
brokers said demand for space may recover later this year, after
the U.S. gross domestic product rose 1.7 percent in the fourth
quarter.
``We hear a lot about the economy improving, and that
certainly affects the minds of landlords who decide they won't
drop their rents any further,'' said Justin Stein, regional
director of client services at brokerage Grubb & Ellis Co.
Midtown Space
In Midtown, about 21.3 million square feet was available at
the end of the quarter, about a third of it being subleased,
Cushman said. Rents averaged $51.68, down from $52.83 at yearend.
Downtown, about 10.7 million square feet was unoccupied. Rents
rose by $1.10 to $40.55 a square foot.
Many of the latest subleases are in midtown, Sicola said,
including 295,000 square feet by J.P. Morgan Chase at 380 Madison
Avenue, 190,000 feet by UBS PaineWebber at 299 Park Avenue,
145,000 feet by Bank of New York Co. at 1290 Avenue of the
Americas.
Executives at companies that advise tenants on their real
estate are not as optimistic about a quick turnaround.
``Hope of an improving economy is a little overplayed,'' said
Michael Silver, president of Equis Corp., a real estate services
firm. ``People are still trying to stabilize and reduce expenses,
and that means more subleasing.''
--David M. Levitt in the New York newsroom (212) 893-4765 or at
dlevitt@bloomberg.net. Editor: Kleege.
Story illustration: For a graph of the midtown Manhattan office
vacancy rate, enter {CBOV1NYM <Index> GP <GO>}. For a graph of
the lower Manhattan rate, {CBOV1NYD <Index> GP <GO>}.
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