June has been an exceptional month for my team. We have won assignments for a leading investment firm, a top fashion company, a savvy cutting edge tech firm and one of the largest high-end auto dealerships in New York. We have been extremely successful in lowering our customer’s lease costs and have been busy working on several large corporate assignments. We are working with financial services, law, design and fashion, healthcare, technology, media, business services and retail firms. Our services include office relocation, lease modification, lease renewal, project management and lease audits. Please feel to contact me for more information.
I am expanding on the discussion of unemployment and the resulting weakness in the New York office market initiated in my May newsletter. A recession is defined by declines in the following: production measured by Gross Domestic Product (GDP); employment potential; investment spending; capacity utilization in manufacturing plants and household incomes. The result is a decline in business profit and an increase in unemployment and bankruptcy filings.
This reflects the current economic scenario in the United States and in New York City. Rising unemployment leads to increased vacancy of office complexes. The result is falling rental revenue to property owners. This loss of revenue leads to an increase in defaults on mortgages and an increase in foreclosure filings.
Although New York City has fared better than most parts of the country as a result of the financial sector having been stabilized, the office market remains weak. Midtown North availability for Class A space was slightly above 8.0% in the first quarter of 2007. The availability dropped to 14.7% in the first quarter of 2010 according to CresaPartners First Quarter New York Market Review after remaining at above 15.0% for three quarters.
http://www.cresapartners.com/tenantsguides/newyork.pdf
The employment picture has steadily improved in New York City dropping to .2% to 9.6% in May. The city’s unemployment has declined every month this year. Unemployment reached 10.5% at the end of 2009 and was higher than the national rate through the fall and winter. The national unemployment rate was 9.7 % in May, down from 9.9 % in April. The city saw the most gains in educational and health services jobs and the biggest losses in construction and manufacturing jobs over the past year.
Mayor Bloomberg was optimistic in a statement, saying the growth showed positive signs including an increase in industry and jobs in the Big Apple. “It’s good news that New York City’s unemployment rate fell again and for the fifth consecutive month,” he said. “But a more telling development is that our labor force has grown to its largest point since at least 1976, probably the largest point ever.”
http://dnainfo.com/20100617/manhattan/new-york-citys-unemployment-rate-falls-96-may#ixzz0s5VRyJxj
The city added almost 15,000 private-sector jobs in May, which is close to the norm for the month, with hiring picking up at employment agencies, doctors’ offices, museums and restaurants. Public-sector job figures were helped by the federal government’s temporary hiring of census takers.
May’s growth was weaker than April’s but still bolstered the case for a surprisingly quick rebound from the depths of the recession, said James Brown, principal economist with the Labor Department. All told, more people were employed in the city last month than had been working a year before, according to the numbers, which are adjusted to account for seasonal fluctuations.
For the first time on record, the city’s labor force — the sum of residents who were either working or actively seeking jobs — exceeded four million in May. The labor force, which is considered a barometer of optimism about the local economy, grew steadily through the start of the recession and dipped only briefly last year, the numbers show.
http://cityroom.blogs.nytimes.com/2010/06/17/jobs-growth-continues-in-may-as-unemployment-rate-falls/
Although it’s still too early to announce an end to the downturn, the city’s job market has certainly bounced back. Layoffs on Wall Street appear to be abating, while the real estate industry is hiring again. However, this rebound is not being led by the financial sector. Although the financial sector has been stabilized, recent job growth has been in non-financial sectors. Although employment has improved, the market still feels weak and rents have not increased significantly.
However, vacancy rates have improved. Statistics for the Manhattan commercial real estate market show the vacancy rate declined to 11.3 % in May from 11.5 % at the end of April. The decline in vacancy coincided with the strongest month for new leasing activity in Manhattan since September 2006.
I believe that we will need to see a rebound in financial services hiring before the office market rebounds significantly. Many of the industries that we are seeing hiring in do not require large increases in office space. For example, healthcare and entertainment jobs do not require as much office space such as industries like finance. Employees in these industries often work from home or outside of an office environment. Trends such as flex-time as well as increased office space efficiency will also result in a smaller than anticipated office market recovery as the economy rebounds. So we will need to see an increase in financial services hiring as well as an increase in hiring in industries that support it, such as law, before the office market recovers fully.
Current Events:
1400 B’way suits 2 apparel firms to a T
http://www.crainsnewyork.com/apps/pbcs.dll/dcce?Site=CN&Date=20100624&Module=12&Kategori=real_estate&Class=122&Type=deals_active&ID=2443596
BofA, JPMorgan sell $650M in bonds tied to One Bryant Park
http://therealdeal.com/newyork/articles/bofa-jpmorgan-sell-650m-in-bonds-tied-to-one-bryant-park
SL Green gets aggressive
http://therealdeal.com/newyork/articles/sl-green-gets-aggressive
Lebron James eyes Columbus Circle Apartment
http://therealdeal.com/newyork/articles/lebron-james-peeks-at-time-warner-center-on-columbus-circle
Despite bargain rents, corporate relocations down
http://therealdeal.com/newyork/articles/despite-bargain-rents-corporate-relocations-down
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