Our condolences to all you landlord reps out there. The Manhattan office vacancy rate may well rise to 10.7 percent by year’s end, according to a second-quarter report from Colliers ABR, and you know what that means—a tenant’s market is coming.
According to said report, released on Tuesday, “23 potential blocks 100,000 square feet or greater [are] expected to hit the market over the remainder of this year which could add just under 9 million square feet to availability (15 percent sublease) and raise the Manhattan overall vacancy rate to 10.7 percent by year-end.”
Robert Sammons, the managing director of research for the brokerage and the author of the report, elaborated for us.
“The rate may sound a little steep and may be surprising primarily because of the speed at which we could hit that level,” Mr. Sammons said, adding that the primary culprit is, of course, the spiraling financial sector. “It might take some people by surprise. But that’s an overall rate, and still within a reasonable range. It’s not the worst it’s been in the recent past.”
In fact, according to Mr. Sammons, in March of 2003, in the aftermath of the dot-com bust and the terrorist attacks, the vacancy rate hit 13 percent.
“We’re a long way from that level,” Mr. Sammons said. Not that it’s impossible to reach that level, should the downturn continue. It all depends on that downturn’s longevity. The longer it lasts, the greater the chances that the recession causes other industries, like media and advertising, to shed space.
Generally, 8 to 10 percent vacancy is considered what brokers call equilibrium in Manhattan’s market. Once the rate rises above equilibrium, tenants have an edge. Conversely, once it falls below, landlords have the upper hand.
Not that landlord reps should be cashing out and buying a cabin in the woods to ride out the coming cataclysm.
“It’s hard to tell people the sky is not falling, because people tend to think in extremes,” said Richard Warshaeur, a senior managing director at GVA Williams. “It’s not the end of the world. We’ve seen cycles before. I don’t think the downward motion will be as fast or as deep as in previous times.”