In defiance of elementary supply and demand, commercial rents continue to rise in Manhattan, even as vacancy rates do, too.
Property owners asked an average rent of $67.13 per square foot from January through March for Manhattan commercial spaces from Lower Manhattan to 72nd Street, a 25 percent increase over the same time last year, according to brokerage Cushman & Wakefield. The firm released the numbers at a power breakfast at Michael’s in midtown on Tuesday morning.
Counterintuitively, overall vacancy rates also rose, from 5.7 percent at the end of 2007 to 6.1 percent at the end of the first quarter.
So much for Econ 101.
Brokers on Tuesday morning explained the commercial market’s buoyancy, in part, by pointing to a torrent of foreign cash.
“There’s a lot more international traffic, the most that I’ve seen in my career, from investors both private, public and sovereign wealth funds,” said Scott Latham, executive vice president for the Capital Markets Group for Cushman & Wakefield. “I think we’re at the top of the shopping list, which should bode well for this market.”
In fact, foreign buyers accounted for an astonishing 45 percent of Manhattan’s property purchases in the first quarter—in the first quarter of last year, they accounted for just 3 percent.
And there’s another factor keeping the commercial market afloat.
While vacancy rates have indeed risen amid the changes dealt to the local economy, “we haven’t seen a dramatic dumping of space on the market,” according to Joseph Harbert, the chief operating officer for the New York Metro Region of Cushman & Wakefield. He quickly clarified: “We haven’t seen it yet.”